Natural Gas Price Forecast: Faces Deeper Pullback Amid Trendline Breakdown

Natural gas triggered a continuation of a bearish retracement on Thursday as it fell through support from Monday at $3.91. Moreover, today’s decline triggered a breakdown from a rising trendline marking dynamic support for the recent advance. The low of the day at the time of this writing was $3.88 and the day’s high was $4.065, leaving natural gas with a lower daily high and lower daily low for the day. Despite the bearish signal, follow-through is key.

An intraday bounce followed the $3.88 low with natural gas rising above the trendline and into a recent three-day consolidation zone. If today’s session ends above the trendline it will indicate stronger demand that what might be anticipated following a breakdown through key near-term support. Wednesday’s low of $3.94 can be used as a rough proxy for the trendline. Moreover, a daily closing price below the trendline will show sellers remaining in control.

Failed Breakdown on Rally Above $4.07

It is possible that today’s breakdown fails and instead support is retained, leading a rally. A decisive breakout above today’s high of $4.07 would provide a sign of strength that could lead to higher prices. Subsequently, Tuesday’s high at $4.19 would need to be exceeded for additional bullish confirmation. There is a price range of potentially significant resistance around the two most recent swing highs from $4.37 to $4.48.

Deeper Retracement More Likely

Nonetheless, given today’s bearish signal, the more likely scenario to play out is a deeper bearish pullback. Although there is an interim potential support zone around the 50% retracement at $3.73, it also begins a range of potential support going down to a weekly low at $3.55. Both the 20-Day and 50-Day MAs are rising and may converge with the 50% zone prior to it being tested as support.

If that happens it may provide a more significant support area given the convergence of several indicators. Further, the 20-Day MA is poised to cross above the 50-Day line, providing another sign of strength. Since the 50-Day MA covers a larger trend than the 20-Day line, it is given priority.

It is also interesting to note that on the weekly chart (not shown) support for this week is around the 200-Week MA, now at $3.92. The low for the week is today’s low at $3.88.

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