Sunday, May 9, 2010

Natural Gas Weekly Technical Outlook

Despite edging lower to 3.855 last week, Natural gas managed to stay above 3.81 support and basically engaged in sideway trading only. The development argues that down trend might not be ready to resume yet and we'll turn neutral first. Some more consolidations could be seen above 3.81 and stronger recovery cannot be ruled out. But after all, we'd expect upside to be limited by 4.386 resistance conclude the consolidation and finally bring down trend resumption. Decisive break of 3.81 low will target 3.0 psychological level next.

In the bigger picture, medium term rebound from 2.409 has completed at 6.108 and the three wave corrective structure of the rebound argues that it's merely a correction, or part of the consolidation in the larger down trend. Current fall from 6.108 might extend further for a retest on 2.409 low next after sustaining below 61.8% retracement of 2.409 to 6.108 at 3.822. Sustained trading above 4.386 resistance is needed to be the first sign that the trend in natural gas has reversed. Otherwise, outlook will remain bearish.

In the longer term picture, while the bounce from 2.409 was strong, it's been limited below 55 months EMA (now at 6.035) and reversed. The failure to sustain above 55 weeks EMA (now at 4.730) also argue that 2.409 might not be the bottom yet. We'll stay bearish as long as this year's high of 6.108 holds and favor a new low below 2.409 going forward.

From the staff at Oil N'Gold


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