Natural Gas Price Forecast: Key Support Break Fuels Bearish Shift

Breakdown Below Key Technical Structure

Natural gas showed downward pressure on Thursday, as it fell below a key support zone to reach an 11-day low of $3.05. The decline triggered a breakdown of the double top reversal pattern below $3.10, and a failure of support at both the 20-day moving average at $3.11 and the uptrend line. It also shows a failure of support near the 100-day moving average as well.

A lower daily high of $3.20 was established as resistance was seen near the 10-day moving average for the fourth day in a row. The break below the neckline of the double top and the 20-day moving average will be confirmed with a daily close below $3.10, which would strengthen the bearish reversal signal.

Momentum Shift and Trend Pressure Builds

Although additional bearish confirmation is needed, Thursday’s price action shows the likely early signs of a reversal of the uptrend. Key upside targets were met near the confluence of the 88.6% Fibonacci retracement of the prior decline and the 200-day moving average, which failed as support in early-February. As of Thursday, another lower swing high was established, the second since the $3.40 peak from last week. This shows a developing downtrend structure.

Downside Targets and Support Zones

An initial downside target is from around $2.88 to $2.84, consisting of the 50-day moving average and the 61.8% Fibonacci retracement, respectively. A drop to the 50-day average would be the second test of that average as support since it was reclaimed in mid-May. Within the zone is the prior swing low at $2.86, which is part of the price structure of higher swing lows for the uptrend. If it fails to hold, another bearish reversal signal will occur. The 78.6% Fibonacci retracement of the advance would then provide the next lower target zone at $2.69.

Larger Trend Structure in Transition

The big question relates to the development of the larger trend structure. In February the long-term uptrend line failed as support, resulting in an eventual decline to $2.50. That low was the bottom of a falling bullish wedge. It led to an upside breakout and rally toward the uptrend line to test it as resistance. Once resistance is seen and price turns back down, that dynamic of testing prior support as resistance is complete, opening the way for possibly a bearish continuation that began on the trendline break in February.

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