Natural Gas rice Forecast: Reversal Points to Deeper Pullback Potential

Natural gas triggered a one-day bearish reversal on Tuesday as it fell below Monday’s low of $3.53. A low of $3.42 was hit at the time of this writing, and natural gas looks primed to touch the 38.2% Fibonacci retracement level at $3.41 before the pullback is done, at a minimum. Trading continues to show sellers in charge as activity remains within the lower third of the day’s trading range and natural gas looks likely to close in a similar position.

20-Day Moving Average is Key

The 20-Day MA represents potential support of note as it is a key near-term trending indicator. If natural gas continues to weaken the 20-Day line becomes the next more significant potential support area to watch. The expectation would be for an intraday bullish reversal to set up, following a touch or close to touch of the line. That is the more bullish scenario.

Pullback in Place

It also needs to be considered that the new trend high of $3.75, that was reached yesterday, could lead to a deeper pullback than a few days. Or maybe a period of consolidation. There was solid confluence of the 61.8% Fibonacci retracement, the neckline of a head and shoulders topping pattern, and the AVWAP from the recent trend high, all around the $3.75 high. There may need to be a longer and possibly deeper retracement or consolidation phase for demand to build up in preparation to bust through potential resistance at the $3.75 high.

Reclaim of 50-Day MA Clears the Way

However, there is also the issue of potential resistance around the 50-Day MA, now at $3.77. It is falling and could converge with the $3.75 price area shortly. That would strengthen the significance of both the 50-Day line and $3.75 price area. A daily close above the 50-Day MA is needed for new signs of strength that may sustainable. That is based on moving averages but when looking at price structure, there is a minor interim swing high at $3.83 that offers a good gauge. If that price level is exceeded another bullish reversal signal will be given.

61.8% Retracement at $3.20

Nonetheless, until there is evidence for further strength, natural gas is at risk of a drop below the 20-Day MA. If that occurs the 61.8% Fibonacci retracement level at $3.20 is an area for possible support. There is also the 200-Day MA, now at $3.41.

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