Nymex Natural Gas futures slipped further underwater in Wednesday's trading session to retest the multi-year lows set at the beginning of January. This price action confirmed an earlier breakout pattern identified on the Autochartist 15-minute time frame. With oil futures continue hovering at or above $100 a barrel and a strong energy sector overall, these sell-offs in natural gas may be establishing a long term bottom at these levels.
The Pennant chart pattern illustrated here shows the narrowing range between support and resistance levels between the two swing lows in the price. So far, the breakout from the pennant has not exceeded the previous low near $2.33 per million BTUs, but it has achieved the minimum projected price forecast.
As the price appears to be strengthening at the upper end of the forecast range, this technical sell-off may prove that there is a lack of selling pressure at these levels. Speculative buyers may then enter the market quickly, setting stop-loss orders below the previous bottom. This would be a low-cost entry point to establish new long term positions in case this does prove to be a major cyclical low for natural gas.
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