Ole Hansen
Ole Hansen, Saxo Bank’s head of commodity strategy, takes a closer look at the oil market amid new US sanctions on Iran and Opec members increasing barrel production.
Article / 14 March 2013 at 17:25 GMT

Strong bullish trend in natural gas points to higher levels

Technical Analyst / Saxo Bank

Bouncing off a decade low in 2012

In the second quarter of 2012, natural gas traded down to 1.90, a level not seen for a decade and slightly above the 38.2 Fiboancci extension measured from the 2008 all-time high. At the same time, the RSI showed divergence that indicated the bearish trend was exhausting.
That was, in fact, the case. Gas bounced and started a new bullish trend that is still ongoing. And for the first time since 2008, the gas price was testing the 200 weekly moving average only to be rejected. 

It will now try to penetrate it again and the indicators suggest it will be successful - and that gas will trade higher.

Natural Gas weekly


Taking out 61.8 resistance
Natural gas barely touched the 200 daily moving average in mid-February before it bounced. Since then, it has not looked back. It is moving higher in a strong bullish trend that has taken out the 61.8 retracement and resistance at about 3.60 – its peak in January.
The 2012 high recorded in November just below 4.00 could soon be tested.

Natural Gas daily

RSI is bullish and shows no sign of divergence. MACD also indicates bullish momentum ahead.
The lower Bollinger band was beginning to narrow, but today’s rally has made it expand again. So now both bands are expanding, indicating the trend is still in its developing stage.

If gas takes out the resistance at about 4.00, a move to at least 4.27 is in the cards. 

BennyBomstaerk BennyBomstaerk
Nice analysis Kim.
I am wondering. In this article you use a mix of many different indicators. RSI, MACD, BollingerBand, Fibo. Could you - perhaps in another article - explain what you use which indicators for, and why you would chose exactly these to look at as opposed to some others in this particular case.
Kim Cramer Larsson Kim Cramer Larsson
Every Technical Analyst use the tool he or she feels comfortable with. I use MACD Moving Average Convergence/Divergence - because it gives a good indication of momentum and underlying trend direction.
Also it can be used as a tool for divergence ie. where an instrument trend is likely to reverse. Divergence is when ex. a new high or low in the market is not met with a new high or low on the Indicator.
RSI - Relative Strength Index - is an internal strength indicator as it compares the price of an instrument relative to itself. It give an indication whether an instrument is overbought or oversold, divergence which indicate reversal and to determine the general trend.
Kim Cramer Larsson Kim Cramer Larsson
Bollinger bands are plotted standard deviation around a moving average. It is a measure of volatility. When bands are widening volatility increases and when they are narrowing volatility decreases. It is especially useful when we don't have information about volume as we don't have in FX.
Fibonacci ratios describes the interaction between trends and counter trends. It is used to find support , resistance and target levels


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