Natural Gas is Poised to Join the Party Lower

• Posted by Greg Harmon
• on August 19th, 2011

Natural Gas ($NG_F) has been the problem child in the energy space since making a double top in mid 2008. Recently it seems to have settled into a groove but is again at risk of a major price move. Lower. And with Crude oil prices falling the macro outlook is already stacked against it. From the monthly chart below you can see it had a sharp move lower and then bounced. Now it has been in a channel between 3.90 and 4.90 for over 18 months. It is interesting on this time frame as it tests

the bottom of the channel because a break below it sees support next at 3.32, the rising 12 year trend line support. Zooming in on a weekly chart below shows it is also testing support of an ascending triangle. The target on a breakdown out of the triangle is all the way down to 2.00. On

this time frame it has a falling Relative Strength Index (RSI) and a Moving Average Convergence Divergence (MACD) indicator that is growing more negative. These both support a move lower. Finally, the Fibonacci view below on the weekly chart shows the oscillation also fits the range between the 38.2% and 61.8% Fibonacci levels measuring the move from the 2009 low to

the turn of the year high. A loss of support of the 61.8% Fibonacci level sees support next at Fan line near 3.50 and then 3.28, the 76.4% Fibonacci level.

So you see, where the broad market and Crude Oil have been having a rough go of it lately, Natural Gas ($UNG) needs to bounce off of these support levels or risk being the new ‘new thing’ going lower.

(As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

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