Natural Gas Price Forecast: Breakdown Structure Points to Lower Levels

Trend Support Breakdown Pressure Builds

Natural gas continued to challenge a key trend support zone on Friday, reaching a new pullback low of $3.03 before bouncing intraday and testing resistance near prior trend support of the 20-day and 100-day moving averages. A lower daily high of $3.14 was established right at resistance represented by the 100-day average. Once prior support is confirmed as resistance, the bearish continuation setup strengthens, and the decline may be ready to continue.

Double Top Confirmation and Failed Support Retest

A breakdown of a double top formation triggered below $3.10 on Wednesday, concurrent with a break below potential support near the 20-day moving average. There was little bearish follow-through, however, as support was found at the uptrend line and the session closed above the neckline, making the breakdown initially suspect. Then again on Thursday, a break below $3.10 was retested and triggered renewed downside momentum, resulting in a successful test of support near the 38.2% Fibonacci retracement. Notably, Thursday closed below the neckline at $3.09, thereby confirming the double top formation.

Lower High Structure Signals Downtrend Formation

A second lower swing high was generated on Wednesday, which is now part of the downtrend price structure of lower swing highs and lower swing lows. Friday generated a second lower low that followed the May peak of $3.40. Depending on how it is measured, natural gas is currently in either its second leg down from that peak or the third. Nevertheless, a short-term bearish trend has clearly begun to take shape.

Downside Targets and Key Support Zone

Given recent bearish signals and signs of weakening, and consistent with the continuation of downside pressure outlined above, natural gas looks likely to continue lower towards the next potential support zone. It starts with the 50-day moving average at $2.89 and goes down to the 61.8% Fibonacci retracement of the prior advance at $2.84. Within that price zone is a higher swing low at $2.86 from May, which remains an important structural support level within the broader bullish framework. It is part of the bullish structure and a drop below it would signal a reversal of the uptrend and a failure of support at the 50-day moving average.

Reversal Conditions and Short-Term Resistance Levels

Short-term strength is indicated above Friday’s high of $3.14, although the lower swing high of $3.25 would need to be recovered before there is a clear bullish reversal signal.

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