Downside Remains in Focus After Head & Shoulders

Natural Gas, Head and Shoulders, Doji – Technical Outlook:

• Natural gas futures fell for a fifth consecutive week
• Bearish Head & Shoulders continues to suggest pain
• Daily chart shows early sign of hesitation, where?

Weekly Chart – Fifth Consecutive Week of Losses Underlines Downtrend

Natural gas futures fell 7.17% this past week, in line with a recent streak of losses since mid-December. The commodity fell for a fifth straight week, marking its longest losing streak since mid-September. What does the path look like for natural gas this week?

From a technical standpoint, there was a notable confirmatory drop below the December 2021 low at 3,536. That opened the door for a resumption of the dominant downtrend since August 2022, exposing the 2020 low at 1.44.

Moreover, prices continue to trade down in the direction predicted by a Bearish Head and Shoulders chart. The estimated trajectory of this chart formation may eventually take prices down to the 1.44 – 1.61 support zone.

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Daily Chart – Reverse Hammer in Focus

In the daily setup, prices confirmed a break below 3.5536, bringing natural gas to the May 2021 trend point at 3.15. However, prices could not close below the latter last week, reinforcing it as immediate support.

Inverted Hammer candlestick pattern was left behind as well. While this is not necessarily an early indication of a reversal, it would be worth keeping an eye to see if prices rebound in the next session. That would confirm the Inverted Hammer.

Such an outcome would put the focus on the 20-day Simple Moving Average (SMA). It could hold as key resistance, maintaining the downside focus. Otherwise, confirming a break below 3.15 exposes the 100% Fibonacci extension level at 2.326 to the 2020 low.

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— Written by Daniel Dubrovsky, Chief Strategist for DailyFX.com

To contact Daniel, follow him on Twitter:@ddubrovskyFX