Sunday, May 30, 2010

Natural Gas Weekly Technical Outlook

Natural gas's rebound last week suggests that consolidation from 3.81 is still in progress. Further rise might be seen initially this week but we'd expect strong resistance at 4.494 to limit up side. Below 4.154 minor support will indicate that recovery from 3.986 is completed and will flip intraday bias back to the downside for 3.81/884 support zone. Decisive break there will confirm down trend resumption and should 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. However, note that decisive break of 38.2% retracement of 5.68 to 3.81 at 4.524 will argue that whole fall from 6.108 has completed and will turn outlook bullish for a possible test on 6.108 high.

In the longer term picture, while the bounce from 2.409 was strong, it's been limited below 55 months EMA (now at 6.047) and reversed. The failure to sustain above 55 weeks EMA (now at 4.679) 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.....Nymex Natural Gas Continuous Contract 4 Hours Chart.

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