Natural Gas Price Forecast: Decline Extends, Approaching Bearish Pennant Bottom

Bruce Powers
Published: Apr 17, 2024, 06:41 GMT+00:00

Natural gas prices continued to weaken, nearing a bearish pennant's bottom, and signaling the potential for further declines if support at 1.63 is broken.

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Natural gas further weakens on Tuesday, falling to a new pullback low as it heads towards the bottom of a bear pennant at the purple line on the chart. If reached today, the price represented by the line would be approximately 1.63. Trading continues near the lows of the day at the time of this writing.

A graph of stock market Description automatically generated with medium confidence

Stuck Inside Consolidation

Monday’s bearish breakdown below support of the 20-Day MA, 50-Day MA, and long-term downtrend line confirmed the continued development of a bearish pennant consolidation pattern. Nonetheless, there is no signal until natural gas breaks out of the pattern. The small symmetrical triangle pennant is bearish because it resides within a larger downtrend. If a downside breakout occurs the chance for the trend to continue lower increases.

Choppy Price Action Until Breakout Likely

Alternatively, an upside breakout triggers a bullish reversal that has the potential to see further strengthening. Initial signs of either a bullish or bearish breakout occur on a move through one of the two boundary lines. However, more reliable signals will be provided on a rise above the most recent swing high at 1.94 or a drop below the last swing low at 1.59. If natural gas reaches the lower boundary line of the pennant and support is seen, the chance for a rally back towards to top line is likely once there is a sign of a bullish reversal. In other words, if natural gas trades inside the pennant, choppy price action will likely continue.

Long-Term Resistance Held During Recent Rallies

The two most recent rallies encountered resistance around previous support from the prior trend lows of February and April 2023 (green and red arrows). That is a logical area to encounter resistance in a downtrend and encountering resistance there supports a bearish continuation of trend. Moreover, the lower dashed blue line in a falling parallel trend channel further marked a similar resistance area.

If a breakdown does occur there is a shelf of long-term support going down to a low of 1.44. That low last provided support at the trend low from 2020. Further, it was the lowest price seen in natural gas since 1995.

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About the Author

Bruce boasts over 20 years in financial markets, holding senior roles such as Head of Trading Strategy at Relentless 13 Capital and Corporate Advisor at Chronos Futures. A CMT® charter holder and MBA in Finance, he's a renowned analyst and media figure, appearing on 150+ TV business shows.

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