Natural Gas futures have plunged to new lows ahead of peak winter demand season, creating a backdrop for a potentially sharp increase in volatility as weather begins to dominate the short term price action. After several attempts to retake the $4.00 per million BTU price level, the futures settled back into the Pennant chart pattern shown here on the Autochartist 240-minute timeframe.
As this Pennant chart pattern progressed, trading pulled into a tight range between the converging support and resistance levels. The apex of the pattern is fast approaching, and the lack of movement in either direction towards the end of a pattern will often result in a sudden breakout. Traders will be watching for the direction of this possible breakout to establish a longer term trend.
A move above the support shown here at the $3.83 level would result in an upside breakout, with a forecast generated for higher prices ahead. A continuation of market weakness could result in a breakout to the downside, however, with a decline below $3.74 needed to bring in selling pressure for a lower forecast. The move is likely to develop quickly once a breakout presents itself, which could happen in Monday's session.
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