Natural Gas Price Forecast: Declines Toward Key Support at 50-Day MA

It looks like a test of support around the 50-Day MA may be in the plans for natural gas. On Tuesday, natural gas dropped below Monday’s low of $4.25 and back below the 20-Day MA. Sellers remain in charge at the time of this writing, as trading continues near the lows of the day, now at $3.93. Potential short-term support at the prior interim swing low of $4.26 seems to be holding so far, but solid selling seems destined to lead to a test of the support near a bull wedge breakout level and the 50-Day MA, now at $3.88.

Normal Pullback Expected

A bull breakout of a descending wedge trend continuation pattern triggered last Thursday and led to a rally into resistance at Monday’s high of $4.25. The current pullback is typical following a breakout as prior resistance areas are tested as support. Once support is found there is the potential for another advance. The weekly chart is also supportive of such a scenario.

On Monday a bullish weekly reversal triggered above last week’s high of $4.10, following a two-week pullback. Although it quickly failed there is the potential for this week to end with a higher weekly high and higher weekly low. Therefore, traders and investors will likely be watching the current bearish pullback for signs of support that may lead to a bullish reversal.

50-Day Moving Average Support

Notice that the 50-Day MA was clearly a support area during the early-March swing low. During the recent correction it was undercut for a couple days and then reclaimed relatively quickly. Therefore, during this decline natural gas could dip below the 50-Day line briefly but should recover quickly. If it does not and there is a daily close below the moving average, then the risk of further downside increases.

Trendline Support Dynamics

Since the higher trendline support was broken mid-March, there is the possibility of eventually testing the next lower trendline before a bearish correction is complete. Since the line is rising it will represent a price above the recent corrective low of $3.73 around April 14 (vertical). Given the overall pattern and potential support around the 50-Day line, there is the possibility of seeing consolidation until then between the recent low and this week’s high.

The next lower trendline has three points thereby marking it as a solid line. Therefore, it should act as support the first time it is approached, or a break below could lead to a sharp drop given the potential significance of the trendline.

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