Natural Gas Price Forecast: Inside Day Signals Pullback Risk

Consolidation Inside Range

Natural gas stalled its ascent on Wednesday, consolidating inside Tuesday’s range, with a high of $4.35 and a low of $4.21. A breakout in either direction may decide the next move, either a bullish continuation or beginning of a pullback. Given the intraday bearish reaction following Tuesday’s high of $4.40, essentially completing a 78.6% Fibonacci retracement ($4.41), a potential resistance zone has been reached. Moreover, notice that the day ended at a top rising 150% extended channel line (dashed) seeming to recognize the relationship to the original channel.

Fibonacci and Channel Targets

Short-term support is around the June swing high of $4.15 and the response to that price area should provide clues to identify strengthening or weakening. Fibonacci analysis suggests that a minimum decline to the 38.2% retracement level at $3.94 could develop if the $4.15 price area breaks. The top original channel line also provides a potential downside target and since it is rising it could represent potential support above the 38.2% zone, depending on when it is approached. Further down is a 50% retracement zone at $3.80.

Bullish Underlying Demand

The recent advance above the lower swing high of $4.15 shows underlying improvement in demand and the potential for higher prices following a correction of some degree. The characteristics of the correction will provide additional data to either support or negate that thesis.

Weekly Pattern Risk

With only two more days to the week natural gas is at risk of completing a bearish shooting star candlestick pattern if price begins to weaken. The week’s low is $4.09 at the time of writing. This shows bullish momentum is waning and therefore it could accelerate.

Upside Potential

A decisive rally above today’s high of $4.35 may lead to another challenge to resistance near Tuesday’s high of $4.40. There is also a target level at $4.45. As well, the area around the top channel line may continue to show signs of resistance if natural gas can continue to gain. Therefore, the higher target could be reached without a break above the channel line.

Outlook

The $4.15 close decides — below targets $3.94, above eyes $4.45. The channel extension and shooting star risk favor caution. Watch $4.15 response — holding supports higher prices, while a break may accelerate a downside move. The swing high breakout suggests eventual upside resolution.

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