Natural Gas Price Forecast: Risk of Breakdown Below Key Support

Downward pressure in the price of natural gas remains dominant as it ended the week below the 200-Day MA and at its lowest closing since the lower swing high of $4.15 hit two weeks ago. This is bearish behavior that leaves open the possibility that natural gas may yet drop below this week’s low of $3.23. Not only is it back below the 200-Day line but also an uptrend line continues as dynamic resistance after failed attempts over the past two days to rebound above line.

Moreover, the week ended below an interim swing low from June 25, showing failure to retain support at a swing low on a weekly closing basis. Although futures closed early on Friday, the bearish technical indications remain valid.

Bearish Indications Dominate

It is also a bearish indication that last week ended with a potentially bullish hammer candlestick pattern on the weekly chart and a closing price in the top third of the week’s price range. While this week ended near the lows of last week. In other words, there is a failed bullish pattern contributing to bearish sentiment as well.

Weekly Trend Support

Despite the bearish indications, there is potentially significant support not too much lower. A break below last week’s low of $3.23 shows the potential to test support around a slightly lower uptrend line that connects to the April swing low. It looks like $3.28 is where the trendline currently sits. Not insignificantly, it is joined by the 50-Week MA, now at $3.24. The area around the 50-Week line was successfully tested as support twice since the March peak and should do so again. Nonetheless, a continuation of the decline below last week’s low triggers a bear flag pattern and therefore bearish momentum could accelerate.

Trendline Support

Two lower targets become possible if a sustained breakdown below the lower rising trendline triggers. There is a 78.6% Fibonacci retracement at $3.14, which is confirmed by a 78.6% target for a falling ABCD pattern (purple). However, the primary initial target from the ABCD pattern is $2.97. The significance of that price area is increased by an AVWAP line (light blue) begun from the February 2024 trend low. It shows support nearby at $2.95. Notice that the AVWAP very clearly marked support at the recent trend low in April and therefore may do so again.

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