Natural Gas Price Forecast: Sellers Hold, Support at $2.75

Corrective Low and Bearish Pressure

Natural gas fell to a new corrective low of $2.83 on Tuesday, breaking below the prior low of $2.87. Sellers remain in control with the bearish continuation signal likely to confirm with a daily close below the prior low. This would position natural gas to test support at the 88.6% Fibonacci retracement of the recent advance, at $2.75. The recent recognition of the 78.6% retracement support area followed resistance at a 61.8% Fibonacci retracement level, showing acknowledgement of these related ratios. The 88.6% level is reinforced by a swing low at $2.74 from August last year.

Support Zones and Potential Reversal

There are a couple of points to note. First, the 88.6% retracement zone is the next potential support area. If it holds and triggers a bullish reversal, a higher swing low will be established, likely leading to a rally toward resistance at the $4.09 lower swing high from January.

Broadening Formation and Price Dynamics

Second, a large broadening formation that has developed in natural gas, showing price discovery expanding rather than contracting, as commonly seen after trends. This could lead to a drop below the recent $2.58 swing low toward the lower boundary line of the pattern and where support may appear. However, a decisive decline below the swing low and then lower boundary line would suggest a failure of the broadening formation.

Resistance Levels and Short-Term Outlook

On Monday, a new interim lower swing high of $3.15 was established joining another lower swing high at $3.19. Together, the $3.15 to $3.19 price range forms a key near-term resistance zone. The range must be reclaimed before natural gas can strengthen toward higher prices. Until then, downward pressure remains dominant and short-term rallies are expected to meet resistance and reverse.

Upside Potential and Targets

Nonetheless, once a bullish reversal is successful from a sustained low, the upper end of the broadening formation becomes a potential target. An upside to $4.50 can be assumed for now, representing the 78.6% retracement of a prior large downswing that established the parameters of the formation.

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