Natural Gas Price Forecast: Bearish Signals Build Below Key Support

Near-Term Price Action and Resistance Test

Natural gas bounced to a high of $2.95 on Wednesday, briefly exceeded Tuesday’s high and tested resistance near the 10-day average. Sellers took back control after that, with trading occurring in the lower half of the day’s range into the session close. Moreover, it looks likely that natural gas may close below the 78.6% Fibonacci retracement level at $2.90, which has recently defined a potential support zone. The level broke with a new trend low on Tuesday, confirmed by a daily close below that level. If Wednesday also closes below the Fibonacci level, a second bearish signal will be generated.

Downside Targets and Support Zones

That would put natural gas in a position to test support near the 88.6% Fibonacci retracement of the most recent upswing at $2.75. The fact that the 10-day average was tested as resistance is also a bearish indication. Joining the 88.6% level is a prior swing low at $2.74 from August, adding to the potential significance of the price area.

Pattern Structure and Expanding Volatility

A broadening formation has formed in natural gas. It is defined by the recent higher swing high in December and a lower swing low in January, showing an expanding consolidation pattern. If the pattern continues to form, there is a chance that the $2.74 prior swing low will be broken and the lower low at $2.58 challenged as potential support. But since the lower boundary line of the pattern is lower, it may be reached before a bottom is found. Keep in mind that the lower and upper boundary lines represent areas of price, where signs of support or resistance may be seen.

Upside Reversal Conditions

On the upside, a bullish reversal signal will be indicated above Monday’s high of $3.15. But since another interim swing high is nearby at $3.19, that higher level needs to be triggered before there is a bullish reversal of structure. Then, higher targets can be considered.

Weekly Close Signals to Watch

How the week’s session ends may also provide some clues about natural gas. There is now a bearish outside week continuation pattern forming. That potentially bearish pattern will confirm with a weekly close below last week’s low of $2.87.

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