Natural Gas Price Forecast: Sellers Regain Control Below Key Averages

Breakdown Below 200-Day Average Signals Weakness

Natural gas dipped lower on Wednesday, falling below the lows of the prior two days and dropping back below the 200-day average. Sellers dominated price action, with weakness confirmed on a daily close below the 200-day average, now at $3.54. A bearish reversal of an inside day triggered following a failure this week to reclaim the 50-day average, currently at $3.78 and falling. The stage is set for a deeper pullback once there is a daily close below the 200-day average. That sets the stage for a test of lower potential support areas as sellers continue to assert control.

Fibonacci Levels Highlight Downside Targets

With sellers in control, a minimum retracement to the 38.6% Fibonacci retracement at $3.46 looks likely. That price is also highlighted by prior price structure. Since the prior two days confirmed support at the 200-day average, as the low of each day found support at or above that average, a break of that support line may not be recovered right away. Below the 38.6% retracement is the confluence of the 10-day average at $3.31 and rising, plus the 50% retracement level at $3.29.

Volatility Persists as Key Support Levels Come into Focus

Given recent sharp swings that followed the $5.02 high in December and the January’s lower swing low at $2.58, volatility during a pullback is likely to continue. That puts lower prices on watch as the above levels may not hold. Following the January low of $2.58, the price of natural gas rose by 55%. Therefore, it would not be surprising to see a dip to the 20-day average eventually.

It represents more significant dynamic trend support and is a better indicator for the health of the trend. Since there has not yet been a test of the 20-day average as support, after it was reclaimed on January 20, that average provides a downside target. Since it recently joined the 61.8% Fibonacci retracement at $3.12, it deserves attention as a potential key support area. The 20-day average is now at $3.13 and has been going sideways.

Failed Reclaims Confirm Bearish Technical Structure

Resistance was seen during the recent advance from a high of $4.00, as it tested resistance near the 50-day average. But the subsequent failure of support at the 200-day average following a reclaim of the line two days earlier is bearish behavior. It shows a failed breakout of that average, and it follows a failed attempt to reclaim the 50-day average. These are bearish signs that further confirm that the sellers are now in charge.

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