The day's price range was relatively narrow and was largely contained in the top third or so of yesterday's range. This is a minor sign of strength that can be given slightly greater weight if today ends above yesterday's high.
The recent retracement low on December 4 was at 2.98. That decline completed a 61.8% Fibonacci retracement at 3.02 and returned to the breakout area of a large symmetrical triangle pattern. This is classic bullish behavior as a prior resistance zone was successfully tested as support and an advance followed. The 20-Day MA (purple) has done a good job of marking dynamic support for the uptrend since it was reclaimed on October 29.
Recently, it was tested as support on multiple days, including yesterday. Although natural gas fell through the 20-Day line on six days recently, beginning with the December 4 low, it managed to close above the line each day. So, there was a fast recovery, which points to underlying demand.
There is the potential for a continuation to new trend highs, but the attempt to break out to new trend highs was cut short last week as resistance was seen around 3.56. That is where resistance was seen following the initial bull breakout on November 20. Tuesday's reversal day showed strength that now needs further follow-through. Momentum will need to be strong enough during this rally to break through 3.56. Otherwise, natural gas could consolidate a bit before it is ready to attempt a trend continuation breakout.
On the downside, a drop through Tuesday's low of 3.09 could lead to a retest of the 2.98 price zone and a decline below it. Also, a daily close below the 20-Day MA would be one sign of weakness. It is interesting to note that the rising 50-Day MA (orange), now at 2.88, is close to converging with the top trendline across the top of the triangle and it will likely be above in the coming days. That would improve the chance that support would be seen at or above the 50-Day line if a deeper correction develops.
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