Case Study 0013: Various Long Lower Shadows Herald a Bottom (Natural Gas)
In this article, we will examine the performance of the natural gas market after the emergence of a series of long lower shadows.
Data Sheet
- Reference: CS0013
- Security: Natural Gas
- Timeframe: Hourly Chart (October 20, 2023)
- Patterns:
- Long Lower Shadow
- Hammer
1. Signal Formation
After a sustained downtrend, the natural gas market displayed a long lower shadow session preceded by a tall red candlestick. Because the small body of the session is near the upper end, the long lower shadow can also be viewed as a variation of the hammer pattern.
2. Early Market Transition
The long lower shadow candle marked the beginning of a relatively brief sideways period where natural gas tested three times the support level set by this candlestick. Finally, the market displayed two more long lower shadows and the onset of a bottom reversal.
3. Resolution
The last pair of long lower shadows signaled the start of a week-long bullish trend.
4. Conclusion and Subjective Review
Technically, the long lower shadow is not a candlestick pattern per se, but rather a specific type of candle line. Under specific circumstances, however, it can serve to identify buying interest at lower prices and potentially signal a reversal bottom.
For natural gas in October 2023, the following market conditions reinforced the validity of the long lower shadow:
- The prior downtrend was extended.
- The long lower shadow was preceded by a long red candle, signaling a potential selling climax.
- The support level set by the lowest point of the long lower shadow was successfully respected on three occasions.
- A second and third long lower shadow helped corroborate the potential floor set near the 2.83 mark.
