Natural Gas Price Forecast: 200-Day Test Signals Trend Decision

Two-Day Test of Key Resistance Zone

Natural gas again tested resistance near the 200-day moving average for the second day in a row on Monday, with a slightly higher trend high around $3.40. That didn’t last long, as sellers subsequently took back control, leading to a one-day bearish reversal below Friday’s shooting star candlestick pattern low of $3.27. The session’s low of $3.16 tested support near the 100-day moving average near $3.15 for the first time since it was reclaimed on Thursday. This was a sign of strength, given that natural gas has remained below the 100-day line since it broke below it in early February. The session is set to complete with a bearish engulfing daily candlestick pattern.

Fibonacci Confluence Meets Moving Average Ceiling

If trading continues above the 100-day moving average, natural gas may again bounce to test resistance near the 200-day moving average at $3.41, or slightly higher toward the long-term uptrend line. However, the advance from the April bottom completed a 78.6% Fibonacci retracement last week, while also reaching the higher target 200-day moving average. Although there is another higher target indicated by the uptrend line, Monday’s reaction suggests there is also a good chance that a top may have already been reached in the short-term.

Structural Retest of Broken Trend Support

The larger dynamic unfolding is that of prior long-term trend support now being tested as resistance. Once that process completes, the larger bearish pattern may begin to reassert itself, or price may instead break back above resistance and resume the broader recovery. In February, a breakdown from a long-term uptrend line triggered a sustained decline, eventually leading to a drop to the April swing low of $2.50. The subsequent and current advance is a pullback to test prior support of the uptrend line as resistance. Since the 200-day moving average is also nearby, it plays a similar role, functioning as an additional layer of confluence, even though it has more recently been inside a consolidation phase.

Near-Term Trend Supports in Focus

If support near the 100-day moving average fails, then the 10-day moving average marks key dynamic trend support near $3.08. A failure of support at the 10-day average may result in the 20-day moving average at $2.96 being tested.

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