Natural Gas Price Forecast: Bearish Momentum Builds as Key Levels Broken

Natural gas triggered a continuation of the short-term bear trend on Wednesday before reaching a low for the day at $3.06. Two higher swing lows failed as support, triggering a bearish reversal of the rally begun from the April swing low at $2.86. In addition, the 78.6% Fibonacci retracement at $3.13 failed as support.

A drop below the higher swing low at $3.15 quickly led to a failure of support at a previous low at $3.10. Sellers remain in charge at the time of this writing and trading continues near the lows of the day. Natural gas may therefore trade lower before the end of the trading session.

Two Lower Target Zones

There are two primary lower support zones indicated on the chart. Given the bearish signal today it looks like the next lower target zone could be reached soon. A long-term uptrend line is approaching fast. In addition, an anchored volume weighted average price (AVWAP) line (light blue) begun from the 2024 trend is about to converge with the trendline. Notice that the AVWAP is approaching a convergence with the rising trendline. Together, those two lines present a potentially significant support zone. Currently, the AVWAP is around $2.97.

AVWAP Support Line in Sight

A successful test of that AVWAP line occurred in April as a price was rejected to the upside after finding support at the line. That led to a sharp bullish reversal. Two indicators pointing to a potentially similar support area increase its significance and potential for a clear reaction. If natural gas forms a low near potential support lines, a higher swing low will result, and a bullish trend structure is retained.

Nevertheless, there is also the possibility that support around the trendline and AVWAP line fail to hold. In that case the swing low from April $2.86 would be the next lower target and it could be broken. From the low at $2.86 to a 78.6% Fibonacci retracement at $2.80 mark the next lower potential support zone.

Sellers in Charge

Bearish momentum looks to be intensifying and that could lead to a break below the AVWAP and trendline. However, keep in mind that bearish momentum will eventually run out of steam. If a drop below a key support area occurs but it is then relatively quickly recovered, that will be a sign of demand returning to the market for natural gas.

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