Natural Gas wash n rinse move reveals real resistance

Natural Gas head and shoulders reversal chart pattern is still intact despite failed rally last week. After that wash out move, real effective resistance is revealed. Am looking for move to neckline.

So I was looking at a very prominent high probability setup in Natural Gas NG in the form of a head and shoulders reversal pattern and it has to ‘prove’ me wrong. Unfortunately the ‘bullish break’ could not even hold itself upright for more than 1 week. LOL. Talk about a flaccid rally.

By rinsing that resistance in such a highly anticipated pattern, the only possible reason I can imagine is ‘Masters of the Universe’ had to do trip some stop loss levels. In the way, both genuine bull and bear camps stand to lose unless you are an insider with perfect knowledge of the operation. This was all explained here.

Please throw that rambling conspiracy talk out because I am sane and sane individuals don’t talk conspiracy. Blame personal bad luck, incompetent chart reading, wishful thinking and animal spirits.

 

Reversal pattern intact after failed rally

Natgas head and shoulders theme intact despite wash n rinse last week

Natgas head and shoulders theme intact despite wash n rinse last week

Natural Gas head and shoulders reversal chart pattern theme remains intact. If the resistance (↑ brown horizontal line) stays, there is a good possibility for price to travel to neckline i.e. February low. However support from that previous 5-week range also has to break for this big pattern to have a chance to unfold.

 

This is what I wrote about Natgas earlier this month.

Bearish reversal potential

Based on this weekly chart, Natural Gas has a high probability setup with multiple elements of a price reversal as well. This is what I can see:

  1. There is a horizontal level based on 2015 52-week high. See the red horizontal line spanning left to right of chart.
  2. This level was tested in the middle of October 2016. As you can see, price action registers a resistance there. By marking the highest tip of that week candle and it’s close, I expand that level into a resistance zone (green). The close of that candle shows effective resistance i.e. the best price could close to.
  3. If you look at the entire chart pattern till date, it closely resembles a potential head and shoulders chart pattern that signals a bearish reversal if true. Now take note that this pattern is forming at slow motion on the weekly chart. I dare say I am not the only person to spot it, a good portion of the market must be looking at this pattern right now.
  4. What’s very convenient now is the left shoulder happens to be our confirmation for 2015 high (see point 2↓). Now look at the potential right shoulder what do you see? If correct that right shoulder is really unbelievable symmetrical it must be a textbook case.
  5. Let me count – 1 2 3 4 5 – till date Natural Gas has parked itself at right shoulder location since 5 weeks. In those 5 weeks, the highs are good enough to reach our 2015 level but none of the weeks are strong enough to close inside the green resistance zone.

 

In fewer words, Natural Gas printed a level in 2015. Price action says it’s resistance in 2016. Everyone sees a bearish chart pattern. It fits our resistance perfectly in 2017. This one is waiting for signal to go.

Natgas prints high probability reversal setup on weekly chart

Note in order for this setup to work:

  1. Resistance red line must not be exceeded. If weekly price closes inside green zone, it is a warning. If weekly price closes above red, trader must decide if it is a real break or fake one.
  2. Price must close at the week level also below immediate supports i.e. two short blue lines. This action ends the current 5-week consolidation and sets stage for down move.
  3. As a last confirmation, price breaks neckline.
  4. In the meantime, price can continue sideways like it did since the last 5 weeks.
  5. To decide if a break above red line is real or fake, look at this resource.

 

Coming back to that wash n rinse move, we had exactly the same development happen for China A50.

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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.   Soh's Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX.   Disclaimer notice: "I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."
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