Natural Gas Price Forecast: Selling Pressure Increases as Trend Support Fails

Natural gas triggered a breakdown of the rising trend on Monday as both the 20-Day MA (3.81) and an uptrend line were broken to the downside, along with last week’s low. A low of 3.61 was reached for the day and at the time of this writing natural gas continues to trade near the lows of the day. So, it looks like there is a good chance that the close for the day will be weak, in the lower third of the day’s trading range and below last week’s low of 3.71. Of course, it would also close below both the 20-Day line and trendline.

Bearish Trend Breakdown

There was a potential support zone identified from 3.70 to 3.64. The drop today exceeded the low of the range but the close could be within it. Nevertheless, although there is a chance that the support zone may hold and lead to a bounce, it looks like lower trend support levels may be tested before the retracement is complete. Today may be the beginning of a realignment of the angle of ascent that natural gas has been on since last August’s swing low.

If there is bearish follow-through then the price area around the 50-Day MA looks likely to be hit. The 50-Day line is currently at 3.49 and it is part of the price range from 3.52 to 3.49. The 61.8% Fibonacci retracement level is at 3.51 and there is an 127.2% extended target for a falling ABCD pattern at 3.52.

Double Top with Two Bearish Reversal Days

It looks like the two wide range red candles near the two recent highs on January 13 and 17 were sending a warning for an interim top. Together they formed a double top pattern with a confirmed breakdown triggered today. The pattern is not perfect given the short rally from last Wednesday’s low. However, it provides another piece of bearish technical evidence for a deeper correction given today’s break below trend support.

Below 50-Day MA Could See 3.38 Area

Nonetheless, if support fails to hold at or above the 50-Day MA, lower potential support levels may be tested. There is a prior swing high at 3.39, and the 78.6% retracement level is at 3.28. Also, an internal trendline showing potential dynamic support would need to be considered as well. The above bearish scenario might start to shift if natural gas can reclaim the 20-Day line and today’s high at 3.83 and then stay there.

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