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Natural Gas Faces Bearish Storm: Will the Downtrend Persist?

By:
Bruce Powers
Published: Jan 30, 2024, 21:03 UTC

As natural gas plunges below moving averages and technical support, a bearish storm brews, raising concerns about the durability of any potential upside reversal.

Offshore natural gas field, FX Empire

In this article:

Natural Gas Forecast Video for 31.01.24 by Bruce Powers

Downward pressure remains in natural gas as it barely drops below Monday’s low of 2.047, while today’s low was 2.046. Today’s candle takes the form of a narrow range day, and it is bearish given its location within yesterday’s trading range. Therefore, a decisive drop below today’s low signals a continuation of the bear trend. As we head into the close natural gas is set to close weak, relative to Monday’s wide range red candle. Trading within the day was weak overall, and the chance for downside continuation is strong.

A graph of stock market Description automatically generated with medium confidence

Natural Gas Has Taken a Decisive Decline

Given how hard natural gas has fallen, highlighted by yesterday’s gap down and bearish follow through, the market looks like it is going lower. Natural gas is below all its moving averages and has failed to sustain an upside reversal following the move back above the 200-Day MA in late-September. On November 27 a bear flag breakdown triggered, and subsequent price behavior has been bearish. Yesterday’s decline saw the price of natural gas drop below potential support of the long-term downtrend line, the 88.6% Fibonacci retracement, and the lower falling parallel channel line (dotted purple). The day ended weak, with a close near the low of the day.

Lower Support Likely to be Tested Before Bulls Return

A potential support zone begins from around 2.03 to 1.95 and it is derived from prior swing lows where support was seen in the past year. In addition, a falling ABCD pattern extended by the 127.2% Fibonacci ratio identifies a possible pivot at 1.92. It is possible that a bear trend continuation triggers with a move below 1.95 and then support is seen around 1.92, leading to a bullish reversal.

Downward momentum continued off the recent swing high and might run out of steam by the time a new trend low is reached. A similar situation occurred last April. Support was seen at the prior trend low of 1.97 for a couple weeks, leading to a drop below that price level on one day, followed by a bullish reversal back above the lows.

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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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