Natural Gas Price Forecast: Rally Stalls at 2.92, Reversal Signals Loom

Bruce Powers
Published: May 23, 2024, 20:30 GMT+00:00

After hitting 2.92, natural gas faced resistance and reversed, suggesting a potential top and increasing chances of a market correction.

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Natural gas advances to a high of 2.92 on Thursday before encountering resistance and turning over. At the time of this writing natural gas has reversed intraday to below the halfway point of the day’s trading range. This indicates a possible weak close following a new trend high and a possible top for now. Today’s high was a little shy of testing the top declining trendline (blue dashed).

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Large Measured Move Completed

However, an 87.2% measured move that matches the percentage advance from the rally starting from the April 23 swing low completed at 2.85. That advance covered the full rising trend channel that ended at 3.64 in October 2023. The current advance started from the 1.52 February swing low. It reflects a degree of price symmetry between the two swings. Once there is a match the chance of encountering resistance that could lead to a reversal increases.

Either way, a key pivot level is identified. Judging by today’s initial continuation into new trend highs, followed by a clear intraday reversal and a likely weak closing price, it seems like the market may have taken notice. Further, the relative strength index (RSI) has turned down from being overbought, the most overbought since the 2022 peak.

Watching for Further Weakness

Nonetheless, there is no daily reversal signal yet and natural gas could still advance. But the next higher target is not much higher at 2.98/2.99. Certainly, the uptrend is extended and due for a retracement. Even if slightly higher prices are seen before a further dip, the chance for a correction has increased.

A drop below Wednesday’s low of 2.61 on the daily chart will be bearish. Key price areas to watch for possible support start with the 200-Day MA at 2.64. That level is followed by the 20-Day MA and prior interim swing low at 2.21. A little lower is the 50% retracement of the current advance at 2.25 and prior swing low at 2.23. Further down is the 50-Day MA at 1.98.

Weekly Chart May End Bearish

Also, be aware of the weekly chart and how natural gas ends the week. As of today, the weekly chart is shaping up as a bearish shooting star. If the week completes in a similar fashion, it will set up a potential sell signal below this week’s low of 2.61.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

Bruce boasts over 20 years in financial markets, holding senior roles such as Head of Trading Strategy at Relentless 13 Capital and Corporate Advisor at Chronos Futures. A CMT® charter holder and MBA in Finance, he's a renowned analyst and media figure, appearing on 150+ TV business shows.

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