Natural Gas Price Forecast: Bearish Trend Persists Despite Brief Bounce

Inside-Day Breakout Tests Overhead Resistance

Natural gas triggered a one-day breakout of an inside day on Tuesday, reaching a high of $3.50. This provided a test of resistance near the 10-day and 200-day moving averages, at $3.51 and $3.55, respectively. Bearish short-term momentum was further confirmed as the 10-day average crossed below the 200-day line. Recent price action in natural gas shows a downward sloping consolidation since the 200-day line failed as support on January 5.

Downtrend Structure Keeps Sellers in Control

Although bearish momentum has slowed, the declining trend remains dominant and continues to show sellers in charge. Therefore, lower targets may still be reached before the end of the bearish correction. A long-term uptrend line provides the next area to watch for support but not reliable enough on its own. Currently, the line is around $3.04. Further down is a price range beginning at the 88.6% retracement of $2.95 and including a monthly low at $2.89, joined by a 100% ABCD target at the same price, followed by a prior swing low at $2.86.

Breakdown Risks Expose Lower Support Zone

A decisive drop through today’s higher daily low of $3.30 is short-term bearish, especially because it could lead to a decline to a new correction low below $3.13 and a test of the lower target zone. Natural gas will need to rise above both the 200-day average and lower swing high at $3.63 before there are clear signs that the buyers are getting more aggressive. Nonetheless, advances in price will occur within a larger downtrend structure. Until the bearish correction reaches a solid and sustainable low, counter-trend rallies are anticipated to experience resistance in key technical areas.

Key Pivot Levels Define Potential Trend Shifts

There is an interim swing low at $3.81 (B) that is a minor level and the falling 20-day average at $3.81. Each represents a key pivot area where the reaction of price may offer useful information regarding changes in demand. The reaction near the 20-day average is the more significant area to watch if it is approached, as it represents resistance for the near-term downtrend. If it is reclaimed, then the 50-day average becomes a higher dynamic resistance target. It is currently at $4.26.

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