Natural Gas Price Forecast: Critical Support Tested After Sharp Breakdown

Natural Gas Tests Key Support After Breakdown

Natural gas further tested support on Monday near a target zone around $2.86 to $2.84, reaching a lower daily low of $2.85 and a lower high of $2.95 for the session. That put it in an area where a counter-trend rally might begin if support continues to hold. The lower swing high from May begins the support range and it is joined by the 61.8% Fibonacci retracement of the full advance that followed the April bottom. This support zone is now critical, as a successful hold could trigger a short-term rebound, while a failure would reinforce the developing bearish trend.

Oversold Conditions Meet Developing Resistance

Although Monday’s new corrective low of $2.85 provided a trend reversal signal, it did not last. Natural gas was down by over 15% from last Wednesday’s high of $3.36 to Monday’s low, occurring within just a few trading sessions. A rest or some degree of profit-taking would not be unexpected, as short-term bearish momentum may begin to exhaust. However, any bounce would need to overcome nearby resistance levels before signaling a meaningful shift in momentum.

Former Support Levels Could Become Resistance

Given the larger implications of last week’s breakdown from a rising channel and additional signs of weakness, short-term rallies are anticipated to test prior support areas as resistance, culminating in another leg down. This is due to the near-term signs of weakening, including a failure of support at the uptrend line, the 20-day and 50-day moving averages, and prior swing lows that helped construct the advance.

Once key support is broken followed by a decline, a counter-trend rally is likely to test prior support as resistance. This dynamic may occur next in the current situation, as it follows a similar pattern that has already played out on the larger timeframe. Therefore, any near-term strength may be viewed as a test of whether former support can successfully transition into resistance.

Long-Term Trend Remains Under Bearish Pressure

Since the $7.44 peak in January, natural gas has established a downtrend with a series of lower swing highs and lower swing lows. Last week’s decline confirmed a new lower swing high, suggesting that the April trend low near $2.50 could eventually be challenged as support and potentially become a bearish trend continuation signal. A break below that level would further confirm that the longer-term decline remains intact and that sellers continue to control the trend.

As the bearish trend developed, the long-term uptrend line that began from the 2024 lows was broken to the downside, providing another sign of a weakening bullish trend and a strengthening bearish trend. The recent pullback toward the uptrend line successfully tested that price area as resistance, as evidenced by the subsequent continuation of the bearish trend. Once the first pullback following a significant price break is completed, the prevailing trend should be ready to reassert itself. With natural gas now testing an important support zone, the market’s next reaction will help determine whether a short-term recovery can develop or whether the broader downtrend resumes.

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