Natural Gas futures continued to drift sideways during Tuesday's session to move further along the Flag chart pattern developing on the short term time frame. This pattern, illustrated here on the 15-minute candlestick chart, has held the market in a tight range just below the key $4.00 per million BTU price level.
The Flag chart pattern began forming after the initial strong drop that began the trading week, with the mild bounce from the $3.80 swing low establishing a sideways range. This places the price near contract lows and may be setting up for a meaningful directional breakout in the near future.
Support provided by the flag has risen up to the $3.85 level which, if breached, would suggest this is a continuation pattern with significant downside remaining to complete the move. Resistance at the $3.90 level has so far capped the bounce from the lows, and a move above that level would trigger an upside breakout. A rally out of the flag would place the market on track for a complete retracement of Monday's drop, with a likely move back above the $4.00 level from there.
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