Natural Gas Prices Extend Losses, Bringing 2020 Lows Even Closer into Focus

Natural Gas, Support Breakout, Another Weekly Loss Ahead? – Technical Update:

• Natural gas prices extend drop, another weekly loss ahead?
• The daily chart shows that a key support level was taken out
• Bearish Rectangle breakout keeps building steam, as expected

Weekly Chart – 2020 Lows Nearing

Natural gas prices are off to a rough start this week, which in recent memory, is not something out of the ordinary. Following a very brief pause in early February, the commodity is now aiming for a second consecutive weekly loss. If we ignore the negligible 4.32% rise in early February, natural gas is practically heading for a 10th weekly loss. You would have to go back to 2001 to find the same losing streak. This is bringing lows from 2020 closer into view.

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Daily Chart – Support Breakout Confirmed

On the daily setting, natural gas confirmed a breakout under the 100% Fibonacci extension level at 2.326. The 8.88% decline was the worst single-day performance since January 5th. That has exposed the 2020 low at 1.44. Practically speaking, lows from 2020 make up a zone of support between 1.44 and 1.612.

Meanwhile, positive RSI divergence remains present. This shows that downside momentum is fading. That can at times precede a turn higher. Even so, the commodity would have to clear the 20-day Simple Moving Average (SMA) which is maintaining the downside focus. Natural gas has not been above this moving average since December 16th, over 2 months ago.

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4-Hour Chart – Bearish Rectangle Breakout Extends

Taking a look at the 4-hour chart, natural gas prices have extended lower after breaking underneath a Bearish Rectangle chart formation – as expected. Now, prices are facing immediate support, which seems to be the 150% Fibonacci extension level at 2.040. Clearing this price exposes the 16.8% level at 1.917 before the 178.6% point at 1.743 kicks in. In the event of a turn higher, keep a close eye on the floor of the rectangle. The latter could kick in as new resistance.

{{FUNDAMENTALS BREAKOUT TRADING}}

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

To contact Daniel, follow him on Twitter:@ddubrovskyFX