Natural Gas Price Forecast: Sellers Dominate Near Key Support

Monday Price Action Shows Sellers in Control

Natural gas gapped lower on Monday, reaching a low of $3.16, with sellers continuing to dominate price action. Sellers took natural gas back below the 200-day average at $3.59, a key potential support area that failed. They remain in charge with the session on track to close in the lower third of the day’s range, starting from a high of $3.74 for the day. Keep in mind that volatility may be impacted by the recent rollover to the March contract.

Lower Targets and Trendline Support in Focus

The next lower target is a long-term uptrend line, plus the January higher swing low at $3.01. Since that low provided a third anchor for the line, it takes on added significance. The reaction of price near the line may provide an earlier indication for either a bearish continuation or signs of strength showing support. So, far it is showing signs of support, but it hasn’t been properly tested yet. If there is a daily close below the January low, it will no longer represent a higher swing low and questions the integrity of the trend. That is, unless there is a relatively quickly recovery above the $3.01 level.

Broader Bearish Outlook if Key Lows Break

If the $3.01 low is broken then there are three successive higher monthly lows, at $2.89, $2.77, and the more significant $2.62. The lower level a key higher swing low for the uptrend. If broken, it presents a broadening bearish outlook for natural gas.

Upside Resistance and Potential Reversal Levels

On the upside, the 200-day average along with the late-January swing low of $3.58 show a potential initial resistance level. That is followed by today’s high at $3.34. A sustained recovery above the day’s high will trigger a bullish reversal, strengthened by the reclaim of the 200-day average. When thinking of upside targets is important to consider the rising trend channel. Last month’s low confirmed an uptrend line at the bottom of the channel it is being tested as support again currently.

Trend Channel Integrity Guides Future Price Moves

Since the lower uptrend line is also part of a parallel trend channel it needs to hold as support to maintain the integrity of the channel. This is important since a bullish reversal from the bottom of the channel indicates the potential for the top line of the channel to be reached or at least approached. That could lead to an eventual rise through January’s high of $7.44.

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