Natural Gas Price Forecast: Key Support Test After Bearish Outside Day

Fibonacci Extension Marks Intraday Reversal Point

For regular readers who may wonder why I use the analysis tools that I do, Wednesday’s price action provides another example. On Wednesday, natural gas advanced to a slightly higher high of $3.31, completing a 78.6% Fibonacci retracement before sellers took control and remained so at time of writing. A subsequent decline below Tuesday’s low of $3.17 established an outside day. It is bearish given the likely weak close for the session. Notably, the first leg up from the April bottom found resistance near the 61.8% Fibonacci retracement, and the 100-day moving average.

Outside Day Signals Shift in Short-Term Control

The pullback on Wednesday may complete a test of support near prior resistance represented by the prior high of $3.18, the top boundary line of a pennant (small symmetrical triangle) consolidation pattern, and then the 100-day moving average near $3.06. However, reaching the 100-day line at this point would be a sign of weakness that could evolve into more significant downward pressure and a possible failure of the bullish pennant breakout that triggered on Monday.

Support Retest Zone Defines Near-Term Structure

Further testing of prior resistance as support looks possible before a continuation to the upside, if that is to occur. It looks like a bullish continuation will follow given recent signs of strength and higher potential targets. In April, an upside breakout of a falling wedge triggered, leading to a reclaim of key moving averages. Subsequently, a bullish continuation pattern formed and a decisive breakout triggered. Moreover, the pennant breakout further confirmed a reclaim of the 100-day moving average for the first time since late January.

Higher Timeframe Targets Still in Play Despite Pullback

Key long-term dynamic trend resistance is represented by the 200-day moving average and it presents another upside target if buyers can retain control. There is also the 61.8% Fibonacci retracement of a larger internal downswing at $3.52 and the long-term uptrend line above there. All are potential upside targets, while the larger bearish picture is retained even if they are reached.

If you’d like to know more about how to trade natural gas, please visit our educational area.