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CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Natural gas prices rally the most over two days since November, eyes on resistance

Natural gas prices rallied the most in two days since November; the downside technical bias holds, eyes on moving averages and on four-hour setting, the former bearish rectangle is back in play.

Source: Bloomberg

Best two-day rally since November

Over the past two days, natural gas prices rallied over 11.5 percent, marking the best 48-hour period since early November. This followed the presence of positive RSI divergence, showing that downside momentum was fading. Is the heating commodity reading for a reversal? Or will the broader downtrend prevail?

On the daily chart below, natural gas finds itself revisiting the 100% Fibonacci extension level at 2.326. This was after prices established a new low at 1.967 before turning higher. Broadly speaking, a bearish Head & Shoulders chart formation remains in play, offering a downward technical bias towards the 2020 low at 1.44.

Immediate resistance is at 2.326. Breaking higher exposes the 20-day Simple Moving Average (SMA). The latter is helping maintain the downward focus and could play out as key resistance. Extending higher exposes the May 2021 low at 2.832.

Daily chart

Source: TradingView

Back in the rectangle

Zooming in on the four-hour chart will give us a better idea of how the near-term bounce is shaping up. Natural gas closed back into the former bearish Rectangle from early February. The floor was at 2.341. Still, confirmation is lacking at the time of publishing. Meanwhile, prices are about to face the 100-period SMA, which could maintain the downside bias.

A turn lower back under 2.341 places the focus on the current February low at 1.968. Otherwise, clearing the SMA places the focus on the ceiling of the rectangle around 2.657. Confirming a push above the latter could offer an increasingly bullish perspective.

Four-hour chart

Source: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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