This is a follow-up post to my last about Natural Gas. As time continues its pattern resembles a price basing period after a protracted downtrend. In the 3 day chart below you can see that price has continued to push upward into the SR 3 line level. Bear in mind that this is a multi timeframe chart where each candle's date range changes with each day added. Therefore individual candle O-H-L-C values change on a 3 day cycle.
(if you would like to better understand the type of support and resistance analysis shown in this blog see the VBSR QuickStart chart.)
On this chart I've added a dashed line that shows where the resistance effects of the upper N band begin. This is one unit of average true range for the previous 40 candles; 1 ATR(40) [original Wilder's smoothing method used]. As you can see the 5.03 resistance level from my last posting currently sits in the middle of that zone. Also the oversold indicator below shows that it is approaching oversold by almost crossing the zero line.
This resistance zone is often very telling of future price and trend movement. When price pushes into it strongly, or even crosses the actual N band, then the case for trend strength in that direction is more likely. Also, closes above the SR 3 line mean that price has exceeded the most recent upper N band trough. This is another strong piece of evidence for trend change.
In the weekly chart of Nat Gas below the upper N band ATR resistance zone is aligned to begin at the same point as the 3 day chart. This multi timeframe alignment reinforces resistance at that level.
I believe the short term trend is up. If it continues then it will hit resistance at the 5.00 to 5.20 area. How it behaves at that point will be telling. If it blows through without pause then the case for the beginnings of an intermediate trend reversal are strengthened. Let's stay tuned to this one.
Can anyone add to this analysis?
Kirk Northington
Northington Trading, LLC
www.metaswing.com
kirk@metaswing.com
Twitter: @kirknorthington
author: Volatility-Based Technical Analysis, John Wiley & Sons