Natural Gas has seen its share of fundamental market changes in recent years resulting in relatively low prices. As we look ahead there is some clear volatility-based overhead resistance in the months to come.
(if you would like to better understand the type of support and resistance analysis shown in this blog see the VBSR QuickStart chart.)
Below there is a monthly continuous chart of Natural Gas. The behavior of the N bands and SR lines show a year-long reduction in price volatility. The dual oscillators below confirm the drying up of volatility. Additionally both N bands are turning inward.
Beginning in March 2011 an area of resistance line compression formed above price, roughly between 5.00 and 6.00. This increases the time this instrument would normally require to rise by 1.00.
Drilling down into the 3 day chart below, we can see that Nat Gas shows a bit more recent price strength in the area of a possible uptrend trying to form. When prices begin to trade above the SR 3 and 4 level it can mean the beginning of an uptrend.
At this point it looks as though Natural Gas can test the 5.03 resistance point. That is to say that based on the current support and resistance picture a test of the 5.03 resistance is more likely than testing support at 3.45.
Can you suggest any further technical readings to augment the range identified?
Kirk Northington
Northington Trading, LLC
www.metaswing.com
kirk@metaswing.com
Twitter: @kirknorthington
author: Volatility-Based Technical Analysis, John Wiley & Sons
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