Natural Gas Price Forecast: Eyes Lower Retracements After 38.2% Fibonacci Test

Natural gas fell to test support around the 38.2% Fibonacci retracement on Friday, as it dropped to a low of 2.63. The 38.2% retracement was at 2.65. At the time of this writing natural gas continues to trade near the lows of the day and will likely end the day in the bottom half of the day’s trading range, thereby indicating remaining selling pressure. Although a bounce is possible from today’s lows there is little sign of strength so far other than the decline stopped at 2.63. Even if there is a bounce, the expectation is for lower retracement levels to eventually be approached and tested as support.

Bearish Continuation Below 2.63

A decisive decline below today’s low will trigger a continuation of the bearish retracement. Subsequently, there are two primary potential support zones to watch. The first is from 2.58 to 2.54, and the second starts at the 61.8% Fibonacci retracement level at 2.48 and goes down to the orange 50-Day MA at 2.46. The first price zone starts with a prior interim swing high, includes the 50% retracement at 2.56, and completes with the purple 20-Day MA.

Another Test of Support at 50-Day MA May Occur

A recent test of support at the 50-Day line failed, and the price of natural gas fell below the line before rebounding back above it. Therefore, the current decline has the potential to successfully test support around the 50-Day MA and lead to a bullish reversal. One reason for this is indicated on the weekly chart (not shown), as a bullish reversal triggered this week.

Although the moving averages help provide some guide to price action, natural gas continues to trade inside consolidation that takes the form of a large symmetrical triangle pattern. Therefore, indications from the moving averages are generally not as reliable or significant as seen in a trending environment. Nonetheless, keeping that in mind they can still provide useful information as they have done recently with support at the 200-Day MA and the 50-Day crossing above the 200-Day.

Internal Uptrend to Provide Insights

Behavior around the internal uptrend line that connects the most recent swing low may also provide some insight. If it fails to hold as support, the 200-Day MA becomes a target, which is now at 2.23. Subsequently, if the 200-Day MA fails, the trendline becomes a target. If the trendline is broken to the downside, the potential bullish outlook diminishes.

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