Natural Gas Futures Drop to Trend Low Amid Bearish Continuation

Bruce Powers
Published: Mar 30, 2023, 20:17 GMT+00:00

Natural gas is down 34% from the recent high, with Fibonacci analysis anticipating a further continuation to new lows.

Natural Gas, FX Empire

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Natural Gas Forecast Video for 31.03.23 by Bruce Powers

Natural gas May futures fall to a new trend low as the 127.2% Fibonacci extension of the retracement off the most recent 3.15 swing high becomes the next lower target. As of the 2.08 low from Thursday, natural gas was down 34% from the that swing high.

Chart, histogram Description automatically generated

Minimum Target at 127% Fibonacci Extension

The 127.2% Fibonacci extension is typically used to designate a minimum first target following a trend continuation. A bearish trend continuation in natural gas occurred recently, and once it does the tool can be applied. The 127.2% potential Fibonacci support zone is at 2.20. Therefore, that would be the next price zone to watch for signs of support and where there is the potential for at least a bounce.

Lower Fibonacci Support Areas

Other potential Fibonacci extension levels are added to the chart in case price continues to fall through the 2.20 level. That could happen quickly or following a bounce. If 2.20 is busted to the downside the next target based on Fibonacci ratio analysis is around the 141.4% extension at 1.89. Further down is the 1.618% extension. That price level is at 1.71.

Is the RSI Telling Us Something?

Notice that the 14-Day relative strength index (RSI) momentum oscillator is trending down confirming weakness in price. A move above the trendline in the RSI will eventually indicate underlying strength is building in natural gas. You can see that earlier in the as the downtrend progressed the RSI was in oversold territory. Yet, price kept falling. This of course supports the idea that a momentum oscillator can remain oversold or overbought for some period of time before price reverses.

The current pattern in the RSI is showing a higher swing high, and the current decline may also create a higher swing high. It is possible that the current drop finds support and reverses before the RSI reaches oversold conditions again. However, if natural gas does so around the same time that price is reaching a potential Fibonacci support area, it will provide a stronger bullish indication.

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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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