Natural Gas Price Forecast: Sellers Regain Control After Failed Breakout

Weakness Emerges After Failed Bull Wedge Breakout

Natural gas showed weakness on Wednesday, following an initial upside breakout of a falling bull wedge pattern the day before. An attempt to rise above the 20-day moving average with a high of $3.19 on Tuesday failed to sustain strength. A one-day bearish reversal triggered on Wednesday on a drop below Tuesday’s low. A low of $2.89 was reached for the day, putting natural gas back below the 10-day average, which was reclaimed on Tuesday.

Resistance Confirms Short-Term Downside Risk

Wednesday’s price action shows continued downside risk. Confirmation of resistance at a near-term trend indicator is bearish. But equally concerning for the bulls is the failure recovery the long-term uptrend line. It failed as support recently and this week’s initial bounce provided the first clear test of resistance. The result was that resistance was confirmed at the prior support line. Since it was followed by a bearish sign, the sellers remain in charge. Depending on the follow through, this could lead to another test of support near the $2.76 corrective low reached last week.

Long-Term Trend Shows Weakening Structure

Weakening signs for the long-term trend have occurred recently. In addition to a failure of support at the trendline, support at the higher swing low of $3.01 from January failed. That provided an initial trend reversal signal, as the structure of higher swing lows was violated.

If a break below $2.78 occurs, a higher swing low at $2.62 from August becomes a target. Given the dominance the downtrend at that point, it looks likely to fail. A decline below there would provide another bearish signal. Both the current low and August low are monthly lows and therefore part of the trend structure on the monthly time frame.

Upside Scenario Requires Reclaim of Key Levels

On the upside, a decisive advance above this week’s high of $3.19 would show the buyers taking back control. That high is now a lower swing high and part of the short-term downtrend structure. In addition, a sustained advance above that level will also reflect a reclaim of the 20-day average and provide another piece of bullish technical evidence.

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