Natural Gas Price Forecast: Falling Channel Signals Rising Downside Risk

Bearish Channel Faces Key Test

Natural gas extended gains to an eight-day high of $3.30 on Wednesday before encountering resistance near a downtrend line. If resistance holds near that high, it will further validate the developing falling channel formation with a third touch of its upper boundary. Since the formation is bearish, it suggests that a peak for the current uptrend may have been reached two weeks ago near $3.40. Moreover, Wednesday’s high marked the second lower swing high since then, further reinforcing the bearish price structure. Whether the channel continues to develop will likely depend on how price behaves around the current support zone.

 Support Zone Holds the Spotlight

Following the high on Wednesday, sellers took back control and drove prices to the day’s low of $3.13, establishing a bearish outside day. This behavior continues the test of dynamic trend support, which almost failed last week after prices briefly dipped below key support levels before recovering relatively quickly. Nonetheless, a key support zone is being tested again, with the initial support range extending down to Monday’s low of $3.02. The support zone includes the confluence of the 100-day and 20-day moving averages, a rising trendline, and the 38.6% Fibonacci retracement at $3.05.

This week’s low of $3.02 represents key near-term support, while resistance stands at this week’s high of $3.30. In addition to Wednesday’s outside day, a relatively wide range outside week is on track to complete this week if current price levels hold through Friday’s close. This raises the possibility of an inside week next week, potentially leading to further consolidation around the support zone.

50-Day Moving Average Becomes Next Downside Target

On the downside, the first target is near rising 50-day moving average at $2.91 and rising. It has already risen above the higher swing low of $2.86 from May and therefore carries greater potential significance. So far, the area around the 20-day moving average at $3.15 has held as support. However, if that level fails to hold, the rising 50-day moving average becomes the next likely downside target.

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