Natural Gas Price Forecast: Bearish Momentum Reigns After Brief Bullish Reversal

Natural gas got hammered today with bearish price action following yesterday’s one-day bullish reversal. Following an outside day yesterday and strong close that tested resistance at the 20-Day MA, natural gas encountered resistance today near that line following the day’s high of 1.77. That high briefly exceeded yesterday’s high. At the time of this writing, natural gas continues to trade near the lows of the day as it tests support heading towards yesterday’s low of 1.64. If today ends near the lows of the day or below yesterday’s low, the risk of further downside increases.

Next Lower Support Zone Starts at 1.63

Potential support around the 78.6% Fibonacci retracement is close by at 1.63, along with prior support at 1.61. These levels can be looked at as a potential support range from 1.63 to 1.61. Moreover, there is a more significant price level at 1.59 as it is a weekly low. Earlier this week a bearish reversal was triggered on the weekly chart as the price of natural gas dropped below last week’s low of 1.755. A drop below the three-week low at 1.59 would indicate further weakness and increases the chance that the downtrend may continue below the recent trend low of 1.52. Two weekly support levels failing within one week is bearish.

Resistance was seen recently at 2.01, which is the bottom of the blue dashed descending trend channel. It shows prior support levels now acting as resistance since the price levels were busted on the way down. This behavior reflects the remaining weakness from the long-term downtrend.

Negative Reaction to Thursday’s Intraday Advance

Given today’s negative reaction to yesterday’s bullish price action, the indication is that the downtrend still dominates. It seems fair therefore to use this week’s high of 1.84 as an important price level to key off. If natural gas remains below that weekly high downward pressure remains and the downtrend rules. A rally above that high would be needed to improve the chances for a sustainable rally and bottom reversal.

Weekly High for Bullish Signal

If a bullish reversal from this week’s candle does occur natural gas will next be heading up into potential resistance at the bottom of the declining trend channel. Further, the recent swing high of 2.01 marks the next higher possible resistance zone. Nevertheless, a daily close above the lower trend channel line (blue dash) will increase the chance that natural gas can eventually rally above 2.01.

For a look at all of today’s economic events, check out our economic calendar.