Natural Gas Price Forecast: Faces 200-Day MA Test at 2.46

Bruce Powers
Published: May 24, 2024, 20:21 GMT+00:00

Following a significant rally, natural gas starts a retracement, with key support levels at the 200-Day and 20-Day MAs in focus.

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Natural gas fell to a five-day low of 2.51 today and it continues to trade near the lows of the day at the time of this writing. It looks to be heading next towards the first test of support around the 200-Day MA since a bullish breakout of the line last Thursday. Today’s bearish continuation follows yesterday’s new trend high of 2.92 and subsequent weak close. That high completed a 92.1 % advance from the February swing low at 1.52. The RSI momentum oscillator is also showing weakness as it turned down from the most overbought reading since the peak of a long-term uptrend in 2022.

A graph with lines and arrows Description automatically generated with medium confidence

Declining Trend Channel Identifies a Price Range

Since April 26 natural gas has been trading within a declining parallel trend channel defined on the chart with two blue dashed line. Clearly price was rejected to the downside near the top line yesterday. That was the third touch for the top trendline. Given the recent sharp rally it would be normal for natural gas to spend some time in retracement or consolidation. When considering the declining channel, once the top is hit there is the potential for the bottom channel line to be tested as support. This doesn’t mean it will happen, but it does increase the possibility that a correction could take some time.

Correction to Strong Advance Could See Lower Support Levels

If the 200-Day MA is broken to the downside, the 20-Day MA becomes the next target. It is currently at 2.35 and should be considered along with the 2.31 interim swing low from January 22. A little lower is the 50% retracement at 2.25, along with the 2.23 swing low from December. That swing low is potentially more significant than the January low as it was a sustained bottom.

The 61.8% Fibonacci retracement is at 2.095, followed by the orange 50-Day MA at 1.99 currently. It is approximately 32% below yesterday’s high. Since the rally was fast, the price of natural gas reached an extreme level relative to the 50-Day line. Strong swings in one direction can frequently lead to a strong reaction in the opposite direction.

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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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