Natural gas continued to pull back from recent highs on Thursday, triggering a drop below a rising trendline. That followed a decline below trend support around the 20-Day MA (purple) on Wednesday. The breakdown was confirmed by a daily close below the 20-Day line. Nonetheless, support was seen today at $3.97, thereby completing a 50% retracement.
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See all Natural Gas forecastsAn intraday rally followed that low to establish a high for the day at $4.20. If natural gas closes the day below the 20-Day line, now at $4.13, it will represent a test of resistance around the 20-Day line, which was support previously. Therefore, the bearish correction may continue unless there is a rally above today’s high of $4.20 and a subsequent daily close above the 20-Day line.
Short Term Bull Trend at Risk
Support around the 50-Day MA was successfully tested as support during the prior bearish decline following the January swing high. Therefore, if the trend breakdown continues lower then natural gas looks to be targeting the 50-Day MA (orange), now at $3.83. A sustained decline below the 20-Day MA enhances the potential for a test of support of the next higher moving average. There is also potential support around the recent swing low at $3.74.
It is joined by the 61.8% retracement at $3.72. A decline below that low will trigger a bearish reversal of the short bull trend that began from the late-January swing low at $2.99. Notice that the 20-Day MA has stayed above the 50-Day line since the 20-Day crossed above the 50-Day in September of last year, other than for a brief period recently. The bullish crossover followed a swing low at $1.88 in late August, which began a new upswing of a larger developing bull trend.
Trend Slope Adjustment
Also, since the immediate trendline may have been broken, the next lower trendline becomes a potential target. Notice that the lower rising trendlines show an acceleration in bullish momentum as the uptrend from the February 2024 bottom progressed. The most recent trendline shows an unsustainable rate of price appreciation. Since there has been a clearly bearish reaction following another test of resistance around the top of a rising parallel trend channel, there is the possibility that the next lower trendline may be tested before the current decline is complete.
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