Implications of Falling Natural Gas Prices and ABCD Pattern Analysis

Natural Gas Forecast Video for 07.07.23 by Bruce Powers

Natural gas continues to retrace its previous gains, falling to a 2.59 low on Thursday, and thereby dropping below last week’s low of 2.62. Also, it is on track to close below last week’s low as of this writing. A 38.2% Fibonacci retracement completed at 2.60 today, while the next support area to watch is the 50% retracement at 2.51, followed by the 61.8% retracement at 2.42.

Fibonacci Retracement Levels Mark Support

Today’s bearish price action indicates that natural gas is likely to fall further in the near-term. However, support should be found at one of the Fibonacci levels mentioned above or the uptrend line, which is now around 2.30. In addition, there is a falling ABCD pattern developing in natural gas starting from the recent trend high at 2.88 and ending at 2.57. Where it completes is a potential pivot level. You can see that this target is just slightly below today’s low. If strength is seen there along with a bullish reversal signal, it will be a sign of strength as it is just slightly below the 38.2% retracement level.

Extended Targets for ABCD Pattern

Also, of significance is the confirmation of price levels seen when extending the targets for the ABCD pattern. In the ABCD pattern we are looking for similarity between swings. The first swing or leg down is the AB leg. Natural gas fell 9.1% during that first leg down. An equivalent decline occurs in the CD leg at 2.57. Nonetheless, we can extend the CD leg by Fibonacci levels of 127.2% and the golden ratio of 161.8%. When we do that confluence with the previously drawn Fibonacci retracement levels occurs. Greater weight is then given to each of the retracement price zones as the potential support areas are identified by two separate methods. The 127.2% extension of the CD leg converges with the 50% retracement zone, while the 61.8% retracement matches the 161.8% retracement level. Also note that possible support of the 34-Day EMA converges with the 50% retracement zone.

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