Natural Gas Continues to Tumble as Selling Accelerates

Natural Gas Forecast Video for 22.02.23 by Bruce Powers

Natural gas is fast approaching its next potential support zone as it falls over 8.0% on Tuesday. As we head towards the end of the session selling is continuing to dominate as price remains near the low of the day.

Return to Oversold Conditions

As of today, on a weekly basis natural gas is the most oversold since 2016, based on the 14-Day RSI oscillator. On a daily basis, the RSI has fallen back below the 30 oversold level. This doesn’t mean much until we get a bullish signal as we can stay oversold for some time. Nevertheless, it does tell us that we seem to be getting closer to a bottom low.

Possible Support Zones to Watch

When looking at the monthly chart to identify the next potential support zone the area of 2.03 to 1.99 stands out. A monthly high or low around that zone was hit on four occasions in 2019 and 2020. If it doesn’t hold then the next lower level is 1.77. On the way there we could see support, but nothing stands out from prior price history.

That lower level is where the second leg down in the downtrend (purple lines) extends to the 127.2% Fibonacci extension. In other words, the second leg down is 127.2% the drop of the first leg at 1.77.

First Signs of Strength

Although there is no indication that natural gas is done going down it is certainly closer to a bottom than at any time in the correction. A rally above 2.37, would be the first minor sign of strength showing up in the market. Following that, a daily close above Friday’s 2.52 high provides further evidence that price is picking up. However, at that point natural gas will be within its most recent consolidation range. It will need to lift out of that range with confidence for signs that buying pressure may pick up.

The top of the range is 2.73. Such a move would put natural gas at a three-week high. The most obvious higher target is around 3.54. That is where both resistance and support were seen in the past and is marked by an orange dash line on the charts.

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