Natural Gas Coiling After Upmove

On April 24, with natural gas futures in the 1.970 to 2.028 range, we alerted subscribers to an imminent up-move, writing: "The little speck of an upturn off of last Thursday's decade low at 1.902 into yesterday's high at 2.022 (+6.03%) accompanied by powerful anecdotal oscillator evidence that natural gas is exhausted on the downside, and that we are witnessing the initial up-move within what should be a base building period ahead of a forthcoming bull phase."

Well, it has certainly gotten that move and then some. Now what?

In the aftermath of the two week up-move in natural gas futures from 1.902 to 2.385 (+25%) that exhibited extremely bullish price structure, all of the action off of the May 1 high so far has taken the form of a coil-type of consolidation pattern that has preserved 70% of the initial April-May up-leg, and in itself represents a shallow, bullish digestion period.

The ability of natural gas to hold above 2.200 prior to climbing to new highs should trigger powerful upside continuation towards 2.900-3.000. Conversely, a sustained break of 2.200 has potential to trigger a much deeper correction, into the 2.050-2.000 area prior to my expectation of upside continuation that projects to 2.6500-2.700.

Only a plunge that breaks the April 20 low at 1.9020 will invalidate my constructive intermediate-term outlook for natural gas prices and the ProShares Ultra Long Natural Gas ETF (BOIL).

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