Tempted to enter March Natural Gas futures long today, but we're not quite ready. We need to break through the downward Trend Line which is coincident with the 20sma, and close above it.
There's a risk from where we are to reject off the TL and 20sma and head back down. That's what happened the last two swing highs, and could certainly happen again. However, there is something special about 3 drives to a bottom (or top). It tends to retrace the full range of all 3 drives, which is the green range on this chart, to at least 50%.
Notice on the top chart, which covers much more time than the bottom chart, the current swing low came very close to the low on March 9th, 2020. This may represent support.
We've had 3 doji's in a row on the Daily chart bobbling between the 8ema and the 20sma. The downward Trend Line is now adding pressure to the squeeze. We're probably about to break out one way or the other very soon. But we haven't broken out yet, so its too early to enter a trade on the Daily today.
I have several indications that suggest the breakout will be to the upside. Here's what I see:
- Bounced near previous low at 2.294, March 2020
- Bounced after 3 Drives to a Bottom
- Closed over 8ema
- Unfilled Gap 2.957-2.920
- Stochastics mid-range, providing ample runway
- About to Break Through 20sma & Trend Line
Since we want to see a break through resistance, as described above, I entered a contingent order that won't trigger unless we hit 2.705. To prevent entering too high due to a gap up or a wide Bid/Ask spread at the market open, I added a limit price of 2.715.
Since this seems like a more risky trade, and an "expensive" contract, I'm using the QG mini-contract ($2,500/pt) instead of the full sized NG contract ($10,000/pt).
Entry: Buy Stop 2.705 Limit 2.715
Target: 50% Fib=200sma=S/R=2.850
Stop: 2.580 just below recent swing low
Risk: 2.715 - 2.580 = .135 * $2500/pt = $337.50
Reward: 2.850 - 2.715 = .135 * $2500/pt = $337.50
R:R = 1:1 a statistical oddity. Not great but acceptable.
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