Natural gas triggered a one-day bullish reversal on Wednesday, bouncing off support near $2.85 to reach $2.94. But analyst Bruce Powers of FXEmpire frames the move as a counter-trend rally that is expected to test a resistance cluster near $3.12 and then turn back down as the broader downtrend resumes.
Natural gas broke out above Tuesday's range to reach $2.94 on Wednesday, triggering a one-day bullish reversal from support. The bounce came off a retracement low of $2.85 set on Monday, where a swing low at $2.86 met the 61.8% Fibonacci retracement at $2.84. Powers treats the move as a possible counter-trend rally rather than a trend change.
Confirmation still hinges on higher closes
The reversal is not yet confirmed. A daily close above $2.93, Tuesday's high, would confirm the breakout, and an advance above the three-day high of $2.95 would deliver another reversal signal off the bottom. Powers still expects natural gas to turn back down after testing prior support levels as resistance, calling it classic bearish trend continuation. However, the strength and duration of any bounce will likely depend on how price reacts near those former support zones.
A resistance cluster defines the next test
The levels above frame the challenge. Powers flags the prior swing low at $3.02, the 50-day moving average near $3.09, and an interim swing low near $3.12 as the first zone to watch. From $3.12, resistance extends up toward last Thursday's high of $3.24, with the falling 20-day moving average at $3.16 still declining into the mix.
A minimum bounce is anticipated to test the 50-day moving average. Because that indicator had been confirmed as support after its last reclaim in early May, its failure on the way down amplifies the significance of the decline — natural gas broke decisively below the 50-day average last Thursday and confirmed the breakdown with a daily close below it.
Moving averages could cap the recovery
Both the falling 20-day and rising 50-day moving averages appear to be converging toward the $3.12 area. Their confluence would build a more significant resistance zone and raise the chance of an eventual bearish continuation. So while Wednesday's reversal points to a possible short-term recovery, the reaction at that cluster will likely decide whether the broader bearish trend holds.
Source: FXEmpire
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