Natural Gas Price Forecast: Gas Weakens as Key Support Levels Tested

Natural gas deepened its pullback from last Friday’s high on Wednesday, reaching a low of $3.45. The day’s low was a retest of support around a 50% retracement. Buyers subsequently took control and established support for the day. A lower daily high and low will complete today, while potential support around the 50-Day MA, now at $3.49, failed initially.

But if the day’s session can close at or above that price level, the 50-Day line will have been quickly reclaimed, which would be a minor sign of strength. That price level takes on added significance since the 20-Day MA has converged with the 50-Day line and it is therefore identifying the same potential support level.

50-Day Moving Average Provides a Guide

Although price levels indicated by the moving averages can provide a guide, they are not as reliable in a consolidating environment as seen recently. The higher swing low at $3.44 shows a potentially more significant price level as it is part of a possible CD leg of a developing rising ABCD pattern (purple). Given the downward pressure shown today, that price level is at risk of being broken.

Furthermore, weakness today triggered a breakdown below last week’s low of $3.50 and created a lower weekly low and lower high. Therefore, a daily close below $3.50 confirms the breakdown on a daily basis, while a potential weekly confirmation will have to wait until the end of day on Friday.

Weekly Breakdown Triggers

It is interesting to note that the past few weeks have shown a series of lower weekly highs on the weekly chart (not shown). That pattern occurred as natural gas was attempting to break above resistance established at the early-May swing high of $3.84. Now that a weekly low was busted, it provides another bearish indication but on the higher time frame. Moreover, there was a potentially bearish shooting start candlestick pattern generated two weeks ago. The pattern suggested potential difficulty in exceeding the $3.84 high as well.

Lower Price Levels

If natural gas falls below today’s low and then the $3.44 low, it looks likely to head for a test of support around the 61.8% Fibonacci retracement at $3.38. That is also close to the weekly opening price two weeks ago.

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