Natural Gas Price Analysis: Reversal Potential and Key Resistance Levels

Natural Gas Forecast Video for 21.08.23 by Bruce Powers

Natural gas breaks down from an inside day today before triggering a trend continuation on a drop below the prior retracement low of 2.57. Subsequently, support was seen at the day’s low of 2.52, leading to a minor bounce.

88.6% Fibonacci Retracement Signifies Critical Level

That low completed an 88.6% Fibonacci retracement. This is the maximum Fibonacci retracement that is considered in the analysis as a decline below it would be considered a failure of the retracement. It increases the chance for a drop below the prior swing low at 2.46 and therefore a bearish trend reversal.

Falling ABCD Pattern Completion Indicates Expected Support

During today’s decline natural gas completed a falling ABCD pattern at 2.546. This pattern anticipates support being seen at the completion. It completes where the decline in the CD leg of the pattern matches the AB leg of the retracement. At the time of this writing natural gas is back above the 2.546 target whereas it could act as resistance instead, a minor sign of strength. Today’s price action could lead to a bullish reversal as the bottom may have been hit. Since the ABCD pattern completion is combined with natural gas hitting the 88.6% retracement, the chance that a low has been reached increases.

Bullish Trigger Above 2.65

Nevertheless, further evidence is needed. A decisive rally above today’s high of 2.64 provides a sign of strength, while a daily close above it will confirm the price action. Of course, additional upside follow-through is needed to further confirm that the retracement is over, and the dominant uptrend can again exert its influence.

Following a breakout above today’s high natural gas will need to get above Thursday’s high of 2.67 to provide confidence. At that point it will be above resistance of the downtrend line, as well as the 12-Day EMA, further confirming strength. The next higher price target would then be the minor swing high around 2.79. That price level is followed by this week’s high of 2.86, which matches the swing high on the daily chart.

Breakdown Remains a Possibility

On the downside, a break below today’s low has natural gas targeting the 127.2% extension of the ABCD pattern. That’s where the CD leg is extended by 127.2% of the AB leg.

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