Tuesday’s strong rally higher by the October 14 natural gas contract was followed yesterday by a generally weaker session as lower-4.000 resistance holds again.
The October contract topped out at a 3.994 high on Wednesday holding below the 4.016 high as resistance set the previous day. It finished the day with a .030 loss settling at 3.954. The contract also posted a bearish inside range bar (harami candlestick) which was been followed by further selling today.
The 10 and 40 day moving averages broken as resistance on Tuesday now become primary support the first being the 10 day average at 3.920 followed by the 40 day average at 3.900. A close below these two averages will turn the near term trend back down with following support at the 3.740-3.760 weekly lows.
Over the past 8 weeks, there have been three upside rallies that have all stalled at the 4.000-4.100 area. There has also been three price breaks into the mid-3.700 area which has held as support each time. A breakout from this range is now needed to determine the next move for the market.
A downside breakout below 3.740-3.760 support would keep the primary market trend down with 3.500-3.550 becoming the next downside objective.
If the breakout instead comes above 4.000-4.100 resistance, the longer term market trend will turn back up and a final seasonal low for 2014 will likely be set.
Technical Indicators: Moving Average Alignment – Neutral-Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Following Index - Bullish
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