Natural Gas Moves Lower, Closing under 21 Day Moving AverageNatural Gas moved lower on Tuesday, closing just under the 21 day moving average. In fact, it is smack in the middle of the 7 day and 21 day moving averages. A solid close under the 7 day moving average will put 3.00 clearly in our sights. We also have a change in the Heikin-Ashi candles, going red after Monday's red doji (see Heikin-Ashi chart below). We now need to see solid follow through to the downside.
I've drawn a couple of yellow lines on the chart, representing 'Hidden Divergence'. This is different than regular divergence and it doesn't happen that often. But when it does, you should take notice. It indicates that there is a potential change of direction coming and that the current trend is exhausted. In Hidden Divergence, the oscillator moves in the direction of the trend but price does not follow. In this case, the Elliot Wave Oscillator moved higher but price did not. As I said, Hidden Divergence doesn't happen all that often. I had to go back to April 27, 2015 for another example in Natural Gas and I've included that chart example below. It shows that the oscillator moved lower but price did not. There was also confluence with price hitting the lower Bollinger Band at the same time. Price did change direction and moved higher leading to a profitable trade.
Hidden Divergence and a close below the 21 day moving average are signs that a downward move is coming.
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Disclaimer: This post is for educational purposes only. Trading is at your own risk.
