Friday, February 19, 2010

Natural Gas Outlook

The choppy b wave down is unfolding as expected and the first potential targets are within sight. But first a review of the bigger picture for a little context..
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The ABC depicted above took almost 4 years to complete. The 2.40 low was an 85% Fib pullback from the 15.78 high. Note the recurring appearance of a mirrored pattern following a spike high, as seen in the 1995 to 1999 period, and more recently since 2005. It is highly likely that the 2,40 low completed a long term structure down from 15.78















The current abc up from 2.40 also appears to be complete, hence the expectation of a pullback as seen in any of the last few months posts. The very truncated nature of that abc up relative to the decline, in both time and price , suggests that it was of lesser degree and additional structures to the upside will be forthcoming, rather than lower lows under 2.40. So far the choppy overlapping move down from 6.11 is totally consistent with that interpretation.
So where does it reverse from and start the next move up?
Corrective "b" or X waves are very tricky, but the first possible targets are now in sight. The 50% retrace of the 2.40 to 6.11 move up is at 4.26.  Is it possible that this b wave down from 6.11 is complete here, at 5.00 a 30% retrace of the spot chart? Not likely, it would be unusually shallow. It IS possible that todays 5.00 print is an irregular  b wave low and the consolidation experienced over the last month is yet to complete and has another chop up to say 5.50ish prior to hitting te lower targets.
In any case when it does start to get to the 4.50 level it will be time to eye up the calls.

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