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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 turn towards the floor of bearish rectangle, will support hold?

Natural gas prices extend decline for a second day; 20-day SMA could maintain the bearish trajectory and eyes remain on a Bearish Rectangle on the four-hour chart.

Source: Bloomberg

20-day SMA Closing in

Natural gas prices extended losses for a second day as Thursday’s trading session wrapped up. In the near term, the commodity has been consolidating after finding support on the 100% Fibonacci extension level at 2.326. Positive RSI divergence is present, showing that downside momentum is fading.

That can at times precede a turn higher.

Now, the 20-day Simple Moving Average (SMA) is closing in from above. The latter has been helping maintain the downside focus since prices closed under it back on December 19th. Thus, it has been almost 2 months since we have last been above this moving average.

But, the SMA is closing in. It may reinstate the downside focus, sending prices towards the 114.6% Fibonacci extension at 1.555.

That would also be in line with the broad technical trajectory of a bearish Head and Shoulders chart formation. Reaching the objective would entail extending losses toward 2020 lows, making for a key range of support between 1.44 and 1.612.

Daily chart

Source: TradingView

Bearish Rectangle in focus

Taking a closer look at natural gas prices, on the four-hour chart, we can see that the commodity continues to consolidate within the boundaries of a Bearish Rectangle chart pattern. Prices recently rejected the ceiling around 2.657, turning lower towards the floor which is at 2.341.

Confirming a breakout under the rectangle may open the door to resuming the near-term downtrend that occurred in late January. However, positive RSI divergence is present, once again showing that downside momentum is fading.

The 100-day SMA is also approaching and may maintain the broader bearish trajectory. Extending losses places the focus on the 138.2% Fibonacci extension level at 2.162. Otherwise, bouncing off the floor of the rectangle opens the door to revisiting the ceiling. Clearing higher would expose the 61.8% point at 2.954.

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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