Natural Gas Price Forecast: Falls to 5-Day Low

Despite the potential for an upside breakout indicated by a five-week closing high on Friday, natural gas sold off on Monday to reach a five-day low of $3.58. It continues to show weakness as it is trading near the lows of the day, at the time of this writing. And it looks likely to close today’s session in a similar position. The day will end with a lower daily high and low, which shows weakness but within a small consolidation zone.

Failed Upside Breakout

Since there was a failed upside breakout of consolidation on Friday, and it was followed by a drop below the low of the consolidation price range on the next day, the small consolidation pattern may have expanded into a potential broadening formation. Notice that the 50-Day MA was last reclaimed on June 2 with a sharp advance, and it followed a failed breakout of the 50-Day line several days earlier.

Therefore, if weakness persists the 50-Day line marks a key potential support level. Currently it is at $3.51, and it has converged with the 20-Day MA. So, they each represent the same price. Further, an AVWAP level starting from the April swing low (A) is at $3.50 and a weekly low is also at $3.50.

Strong Support at $3.50

When multiple indicators point to a similar price level, that area of price can take on potentially greater significance. Either by drawing price towards it like a magnet or repelling price and exhibiting signs of strong support. Moreover, if the price zone fails to hold as support, a breakdown could lead to downside momentum spiking, as the chance of an eventual resolution to the upside diminishes. The weekly low in natural gas is most significant as it is part of the weekly bullish price structure.

Weekly Patterns

Last week was an inside week and it followed a potentially bearish shooting star candlestick pattern the week before. Since last week’s high did not exceed the prior week’s high, natural gas remains prone to potential downside risk warned by the shooting star. But it also has potentially strong support not far below from current prices. Further consolidation before natural gas makes another attempt to rise above the May swing high (B) at $3.84, might make that breakout more successful, if it does occur. But only if it stays above last week’s low of $3.50.

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