Natural Gas Price Forecast: Bearish Trend Faces Critical Breakout Test

Consolidation Keeps Resistance in Focus

Natural gas extended its consolidation phase on Thursday, remaining below a key resistance zone. The combination of a downtrend line and uptrend line marks potential dynamic resistance and a potential signal for resistance, or strength if a break above either line occurs. Key near-term resistance is also at the top of the four-week range and support is at the bottom of the current decline at $2.67.

Natural gas futures daily chart shows consolidation below key resistance zone. Source: TradingView

Although a decline through the low would be bearish, there is potential support nearby at the higher swing low of $2.65 from April. That could result in a muted response following a breakdown below $2.57, or an acceleration in selling since it would indicate that the downtrend may be getting ready to continue toward lower prices.

Natural gas futures daily chart shows larger trend structure. Source: TradingView

Bearish Structure Remains Intact

Overall, the outlook for natural gas is bearish given the developing downtrend structure and it remains below long-term and intermediate moving averages, including the 50-day, 100-day, and 200-day moving averages. The expectation is for a bearish continuation unless there is a decisive breakout above the recent lower swing high of $2.89. That high confirmed resistance at a trendline after it had been shown as support in July.

$2.89 Breakout Could Shift Momentum

A decisive bullish reversal signal above $2.89 would trigger the breakout of the four-week consolidation range, setting up a test of key resistance. The lower swing high of $2.98 is an initial upside target but resistance may be seen at the 50-day moving average near $2.96 first. Since the moving average is falling, potential upside from a bottom reversal will narrow as it approaches the $2.89 high.

That average has not yet been tested as resistance since natural gas fell below it on July 9. So, it would fit that it may be tested as resistance before the downtrend continues lower. However, given its declining trajectory, that could happen when the 50-day moving average reaches the top of the bottom consolidation range at $2.89, or nearby.