Deepening Bearish Sentiment in Natural Gas Takes it to New Lows

Natural Gas Forecast Video for 06.02.23 by Bruce Powers

Natural gas reached a new low of 2.34 Friday as bearish sentiment prevailed as it has for many weeks. The 88.6% Fibonacci retracement at 2.42 was exceeded to the downside with price entering a somewhat large support zone identified from monthly support of two years ago. There doesn’t seem to be panic, just a slow relenting drip lower.

No Secret

The situation with natural gas is not a secret. When most market participants are aware and watching what is going on, the expected scenario may not happen. We could be seeing that play out not for natural gas.

Many traders and investors are watching natural for a chance at catching a strong rally off the bottom. Of course, buying near support is fraught with danger, particularly now given that all prior potential support levels have been busted to downside, and this occurred with little hesitation. Counter-trend rallies since the mid-December swing high have lasted no more than a day. That’s over 31 trading days without a proper retracement and a testament to the degree of bearish sentiment contained within the downtrend. There are no indications yet that bearish sentiment has abated or weakened in any way.

Support Levels to Watch

Just below today’s low is the completion of a falling measured move at 2.33. At that point the second leg down (2) off the August 2022 high matches the first decline that starts at (1). It is not uncommon to see this type of symmetry or similarity between swings in financial market. The measured move is one of the most common chart patterns in technical analysis.

A monthly support range is highlighted in red on the chart. It starts at 2.42 and goes down to 2.24. Typically, traders will watch for a reversal off a support zone once it is reached. If a daily time frame is the primary decision tool, then a 4-hour or 2-hour chart might be used for a reversal signal that allows for the opportunity to get in closer to a low, so risk is tight. The risk and initial stop are clear at entry.

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