A break below a bearish flag pattern in Natural gas prices (NGAS) on Thursday had suggested a bearish continuation in a trend from highs posted in late December.
The break was not sustained as $2.88 support caused downside momentum to fizzle out, followed by strong buying on Monday to scale back above the lower bound of the flag, invalidating the pattern.
Natural gas prices surged higher to scale above the psychological $3.00 price point today and were last seen trading at $3.07 for a gain of 4.33%.
In the absence of a sharp late day decline, today’s single day advance has wiped out last week’s losses. The momentum currently seen to the upside is hinting that NGAS may have resumed in a bullish trend and that the correction from late December completed in February.
The next level of upside interest at $3.10 is considered major resistance and will be important for a directional bias and overall sentiment regarding the predominant trend. The horizontal level triggered a turn lower in a recovery from late October and acted as support in early January following a sharp drop.
Today’s price action has served to take prices back above the 200-period daily moving average, and a sustained break above the indicator this week adds to the case for a broader bullish run.
Some resistance can be seen at last week’s high of $3.08 but more important resistance remains at $3.10. There is also a broken trendline that has not been breached to the upside as of yet, it currently falls within close proximity of the $3.10 price point.
Today’s momentum is a big indicator and will likely keep the instrument well bid on declines. It would require a sustained break of $2.88 support to negate the bullish sentiment accompanied by today’s gains.
From a broader perspective, NGAS turned higher from a low in March 2016 and rallied until December prior correcting lower. The recovery seen this month has nearly erased the decline from February and is on track to post a monthly bullish engulfing candle.