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Analyzing Natural Gas Trends: Will Support Hold or Give Way?

By:
Bruce Powers
Published: Oct 2, 2023, 20:28 GMT+00:00

The current resistance seen around the long-term downtrend line suggests that natural gas might need a period of consolidation or retracement before attempting another rally. The breakout above the trendline last week has so far failed to follow-through to the upside.

Natural Gas facility, FX Empire

In this article:

Natural Gas Forecast Video for 03.10.23 by Bruce Powers

Following a new rally high of 3.00 last Friday, natural gas turns down to test trendline support with a low of 2.84 for the day (as of this writing). That’s a four-day low, which puts natural gas into a large gap. If the trendline continues to behave as support, an upside continuation remains in play. However, today’s weakness may see natural gas close at a four-day low thereby increasing the chance for a deeper retracement. Potential support represented by the trendline will vary going forward given its slope, but for today it looks to be around 2.825. The 38.2% Fibonacci retracement is close by at 2.827.

A graph with lines and numbers Description automatically generated with medium confidence

Stuck in Last Week’s Trading Range

Unless silver can escape last week’s range of 2.55 to 3.00, it will trade inside last week’s range and therefore be prone to back-and-forth choppy price action. Certainly, given last week’s wide range natural gas could trade within last week’s range all this week.

Resistance Seen at Long-Term Downtrend Line

For the past four days natural gas has been testing resistance around the long-term downtrend line. Last week’s high of 3.00 was above the line but it could not rise further. Clear signs of resistance so far may be a sign that natural gas needs a rest to build up energy before it makes another run for a new trend high.

Some consolidation or a retracement would be healthy for the advance as a breakout above the trendline is one piece of evidence signaling a possible change in trend, from downtrend to uptrend. A breakout triggered last week but there is no upside follow-through. At last week’s high natural gas was already up by a healthy 17.4%.

Possible Support for Deeper Retracement

A drop below the internal downtrend line shows natural gas next heading towards the area of the 50% retracement at 2.77, followed by the 61.8% Fibonacci retracement at 2.72. Last week’s gap is not filled until natural gas hits 2.67.

Upside Potential Remains

For the upside, a decisive advance above last week’s high may see natural gas quickly reach its next higher targets. First, there is a prior swing high around 3.02. That price level is quickly followed by the completion of an ABCD pattern with the CD leg extended by 127.2% of the AB leg of the advance.

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About the Author

Bruce boasts over 20 years in financial markets, holding senior roles such as Head of Trading Strategy at Relentless 13 Capital and Corporate Advisor at Chronos Futures. A CMT® charter holder and MBA in Finance, he's a renowned analyst and media figure, appearing on 150+ TV business shows.

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