Recent attempts to strengthen the price of natural gas have been met with failures. Last week’s swing high of 1.94 completed a lower swing high, relative to the higher March 1 swing high. Further, recent strength was met resistance below lower blue dashed parallel channel line. In other words, the dashed line represents potential resistance, and evidence for resistance was seen. Such behavior reflects continued downward pressure on the price of natural gas, which was confirmed with today’s breakdown.
Moving Average Support Zone Fails
Notice that the downtrend line, orange 50-Day MA, and purple 20-Day MA had all converged around the same potential support zone. There was a clear chance for the zone to reject price to the upside and it has failed to materialize. Instead, a bearish breakdown has been triggered, putting short-term price action in alignment with the larger bearish trend. A breakdown from consolidation is first indicated on a drop below the lower boundary line, but more so on a decline below the most recent swing low at 1.59.
Range Bound Until Pennant Breakout
Regardless of the bearish nature of the pennant pattern, it won’t matter much until there is a breakout of the pattern. Choppy range bound trading is likely for the time being if the pennant continues to evolve. Certainly, the pattern could evolve for a while longer with trading contained within its boundaries. Therefore, a bounce off the lower boundary line could eventually lead to a test of resistance at the top line of the pattern. At that point, a bullish reversal may also be a possibility. Given recent history, an upside breakout would be triggered on a rally above the most recent seeing high at 1.94.
For a look at all of today’s economic events, check out our economic calendar.
