The new front month May 15 natural gas contract broke out to the downside last Thursday from a sideways triangle pattern.
The breakout under 2.710-2.720 trend line support triggered the pattern. After settling Friday’s session at 2.639, down .164 or 5.8% for the week, the May contract has since traded down to a new contract low at 2.608 in today’s session.
The 2.608 overnight low is the first area of support followed by weekly low support at 2.567-2.575. A close under weekly low support would turn the lower-2.400 area into the next downside objective.
A breakout from triangle patterns are typically followed by a retest of former support as resistance. This would entail the May contract trading back up toward the 2.710-2.720 level which now becomes resistance. If this area is reached and holds as resistance, it would be a very bearish technical signal for the market.
A close back above 2.710-2.720 followed by the 10 and 40 day moving averages at 2.770-2.790 would indicate last week’s breakout has failed turning the primary market trend back up.
The funds added 6,389 contracts to their existing long position in the natural gas market according to Friday’s Commitment of Trader’s report. The current position was estimated at 113,150 contracts as of last Tuesday’s close.
Technical Indicators: Moving Average Alignment – Bearish
Long Term Trend Following Index – Bullish
Short Term Trend Following Index - Bearish
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