Natural Gas Price Forecast: Downtrend Intact Despite Consolidation

Friday’s Resistance Test Signals Continued Pressure

Another successful test of resistance at the 20-day moving average for natural gas occurred on Friday, while a new lower daily low of $2.78 also showed downward pressure. Seeing resistance at a key area for the downtrend, is bearish by itself but given the three-week consolidation range that has formed near the bottom of the trend, further downside may be limited for now.

Key Fibonacci Support Zone in Focus

The low for the downtrend at $2.62 essentially completed an 88.6% Fibonacci retracement of the prior advance. That magnitude marks the last Fibonacci retracement level before a continuation below the prior swing low becomes more likely than a bullish recovery. Potential support may exist near the May 7 higher swing low of $2.68, and support could be seen anywhere down to the $2.62 low, given the consolidation environment. The 88.6% retracement at $2.595 may also be tested more specifically as support.

Upside Hurdles and Reversal Triggers

On the upside, the 20-day moving average has converged with the downtrend line, identifying a similar area of near-term trend resistance at $2.77. A decisive reclaim of that average would show strengthening, along with a rise above Friday’s high of $2.78. The recent high of $2.83 would then be the first upside target, followed by the 100-day moving average at $2.92.

Downtrend Stays Favored Until Averages Reclaimed

Notably, natural gas remains below all its key moving averages, and until that starts to change, the near-term downtrend can be anticipated to continue unless there is contrary technical evidence. A sustained rise above the 20-day moving average would be one piece of evidence, while a daily close above the recent lower swing high of $2.81 would confirm a reversal signal for the downtrend. Upside looks limited, though, given key trend resistance indicated by the 100-day moving average and the 50-day moving average above it at $2.99. Thus, Friday’s successful test of the 20-day moving average, combined with the new lower low, continues to favor the downtrend until those averages are reclaimed.

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