Natural Gas: Key Technical Insights for Traders

kemarin

NGAS

In this Idea, we'll take a closer look at the key insights for NGAS, with a focus on the long-term bullish outlook towards the $4.70 target, which has been in focus since January 2023.

Focus on the $4.70 Target: Why It Matters
While it’s important to track short-term market movements, we should not lose sight of the overarching bullish trend that has been developing for NGAS. The target of $4.70, based on Fibonacci retracement levels, continues to be the key level for a potential price rally.

Since the beginning of 2023, we have been monitoring the formation of a bullish shark pattern around $2.41, which suggested a possible upward move toward the Fibonacci levels above $4.70. (links at the bottom)



Recent Price Action and Key Developments
Bullish Shark Pattern Formation: In January 2023, the bullish shark pattern formed at $2.41, signaling an upward move toward higher Fibonacci targets. This pattern remained intact for much of 2023.

• October 2023 to January 2024 Retracement: During the period between October 2023 and early 2024, NGAS briefly tested the downside, showing signs of potential invalidation of the pattern. However, it successfully bounced back in mid-December 2024, breaking above the previous October highs and establishing new highs at $4.28.
  

• Current Price Level: As of the latest data, NGAS is trading at $3.91. While this is a step back from the $4.28 high, the overall bullish sentiment remains intact, and attention should still be focused on the $4.70 target.
  

Bearish Divergence and Pattern Completion
Despite the positive movement, caution is needed as some bearish signals have started to emerge in recent days:

• Bearish Divergence on the RSI: There are noticeable signs of bearish divergence on the Relative Strength Index (RSI), suggesting weakening momentum in the upward trend.
  

• Bearish Butterfly Pattern: A bearish butterfly pattern has completed at $4.21, which could signal a potential retracement. If this pattern holds, it could result in further downside pressure in the short term.
  

Fibonacci Levels to Watch
Fibonacci retracement levels are essential in guiding traders’ decisions, and NGAS is currently hovering below a critical level:

• 11.3% Below the .382% Fibonacci Level: NGAS is still 11.3% below the .382% Fibonacci retracement level, which is projected at $4.76. This level represents a major target for the bullish shark pattern that formed in January 2023. We should keep an eye on this level, as it remains a strong area of interest for a potential upward move.
  

• Potential for a Bearish Crab Pattern: If NGAS extends its price action toward the 161.8% Fibonacci level, there is a possibility that the bearish butterfly pattern could evolve into a bearish crab pattern. This scenario would likely coincide with the major .382% Fibonacci retracement level, increasing potential interest in this price zone.
  

Maintaining a Focus on the Long-Term Trend
While short-term fluctuations may present challenges, the long-term outlook for NGAS remains bullish, with the target of $4.70 still in focus. We should continue to watch the evolving patterns closely, particularly the Fibonacci retracement levels and the recent completion of the bearish butterfly pattern. However, the core focus should be on the potential for further upside movement toward the $4.70 target, as the overall market structure continues to support this view.

Happy Trading,
André Cardoso