Bearish Momentum: Natural Gas Faces Steep Decline, Testing Key Levels

Bruce Powers

As natural gas respects support at the 78.6% retracement level, traders look for signs of strength with a close above 2.39, while a move beyond 2.49 could mark a bullish reversal.

Natural gas tanks, FX Empire

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Natural Gas Forecast Video for 12.12.23 by Bruce Powers

Natural gas accelerates its decline today, falling to a new retracement low and completing a 78.6% Fibonacci retracement before finding support. Once a low of 2.29 was reached, support stepped up leading to a relatively strong intraday bounce. Two higher target levels were busted to the downside during today’s decline with little hesitation. Both the completion of a 127.2% extended ABCD pattern target and a prior swing low at 2.425 failed to stop the decline. During the bounce it attempted to recover the 7.524 swing low at 2.524 but has failed to do so at the time of this writing.

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Current Bearish Correction Exceeds Previous

It is interesting to note that the current correction has now exceeded all prior bearish corrections since the February 2023 bottom was hit at 1.97. Until today, all prior bearish retracements since the February low had been exceeded except for the drop from the March 3 high at 3.03. A 35.7% decline followed that high. As of today, the current decline has seen the price of natural gas drop by 37.03%. In general, this relationship reflects increasing selling pressure in natural gas. It also might signal a capitulation move for the decline.

Respects Support at 78.6% Fibonacci Retracement

Natural gas respected support at the 78.6% retracement level today. That is a logical area for the retracement to find strong enough support to be followed by a tradeable bounce. If today’s close is above the halfway point of the day’s range at 2.39, it will indicate minor strength. Further, a daily close above the prior swing low (now potential resistance) of 2.42 will also be a sign of improving demand. Nevertheless, a clearer bullish signal will be needed with a move above today’s high of 2.49. Once a daily close occurs above today’s high natural gas should be ready to advance up into potential resistance areas.

If Price Keep Falling

If sellers remain in charge however and today’s low of 2.29 is busted, natural gas likely heads first towards the completion of a falling ABCD pattern at 2.22, where the CD leg target is extended by the 161.8% Fibonacci ratio. Slightly lower will then be the 88.6% Fibonacci retracement at 2.14.

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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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