Natural Gas Price Forecast: Critical Resistance at 20-Day MA Leads to Selloff

There have been five consecutive days of rallies into resistance around the 20-Day MA and each time price has been rejected to the downside. Today is the fifth but with one important difference relative to the previous three days. Trading has occurred below yesterday’s low, and natural gas is on track to close below that low, which was 1.70. This would indicate greater weakness than what was seen in the past couple of days when the lows were above the prior day’s low and the close was green, above the open.

Sellers Back in Control

Today’s drop indicates that the sellers are back in control. After five days of failing to break through the 20-Day line supply became more aggressive, driving prices lower. That is a change in character from recent days. If it can’t go up, then down or sideways are the two choices. It has been going sideways but today indicates maybe a further decline may be forthcoming. The 8-Day MA crossed below the 20-Day three days ago and it continues to be pointing down.

Depending on what happens next, as today is only one day, if the selling pressure continues the recent 1.64 low may be at risk of being busted. If it does fail to hold as support, the 78.6% Fibonacci retracement level is at 1.63. Weekly support could be seen around 1.64, which was last week’s low.

Increasing Chance of Bearish Continuation

All the signs are there for a possible bearish continuation of the trend. There is a clear downtrend in both the near and long-term price structure and natural gas is below all its moving averages from the 12-Day and up. However, it is sitting at a long-term support zone that includes the lowest traded prices in 28 years. The lowest price of the range is 1.44. It therefore becomes likely that support and a bullish reversal would be seen above that low price.

Recent price action may end up being part of a bottoming process given the significance of the support zone. If that turns out to be the case, the first thing that should happen is a rally above the six-day high of 1.77, followed by a daily close above it. After that the price of natural gas may head higher.

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