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Natural gas: prices face worst week since January as eyes move to key moving averages

Natural gas prices setting up for its worst week since late January; on the daily, the commodity is back to testing the 20-day SMA and Bearish Rising Wedge breakout remains in focus on the four-hour chart.

Source: Bloomberg

Prices Testing the 20-day SMA

So far this week, natural gas prices have declined over 15 percent. The heating commodity seems to be setting up for the worst five-day performance since the end of January. The leg higher which occurred towards the end of February followed persistent positive RSI divergence, showing that downside momentum was fading.

However, while natural gas was able to push above the 20-day Simple Moving Average (SMA), the 50-day line is yet to be tested. Broadly speaking, the bearish Death Cross between these 2 SMAs since December remains in focus. The falling trendline from August is also maintaining the downside bias. Now, prices are back to testing the 20-day SMA.

A breakout lower could open the door to revisiting the February low at 2.52 towards the 2020 low at 1.44. Otherwise, immediate resistance is the 50-day SMA followed by the 23.6% Fibonacci retracement level at 3.297.

Natural gas daily chart

Source: TradingView

Eyes on the 100-period SMA

Zooming in on the 4-hour setting can help paint a clearer picture of the near-term directional setup. Prices have confirmed a breakout under a bearish Rising Wedge chart formation, opening the door to resuming the prior downtrend. Now, prices are facing the next key technical test – the 100-period SMA. The latter is holding as key support, as well as the midpoint of the Fibonacci retracement at 2.498.

Confirming a breakout lower opens the door to extending losses, placing the focus on the 61.8% and 78.6% levels at 2.373 and 2.195, respectively. Not long afterward, the February low will come into play. In the event of a turn higher, the 38.2% level seems to be immediate resistance at 2.622 followed by the 23.6% point at 2.777.

Natural gas four-hour chart

Source: TradingView

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The information 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 Bank S.A. 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 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. See full non-independent research disclaimer.

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