Natural Gas Price Forecast: Short-term Weakness Sets Stage for Next Run

Natural gas triggered a one-day bearish reversal on Thursday, as it triggered a breakdown from a shooting star candlestick pattern on a drop below $3.34. A lower daily low and high will be established and the low of the day at the time of this writing was $3.24. This puts it position to test the 200-Day MA as support, which is currently at $3.21. Essentially, natural gas is bound by the 200-Day MA ($3.21) on the bottom and the 20-Day MA ($3.44) at the top, marking an area of resistance.

Bottoming Process Continues

Although the price of natural gas weakened today the technical bias is to the upside. Recently, a higher swing low was established, and the 200-Day MA was successfully tested as support. Also, be aware that the 20-Day line has been turning up following a downswing. Despite the assistance of the moving averages, the most recent swing high at $3.51 and swing low at $3.10 (C) provide key price levels as they help define the current trend price structure.

Higher Swing Low Indicates Upside Potential

Since a high swing low was recently established at $3.10 there is the potential for a rising ABCD pattern to eventually be completed. An initial target from that pattern is at $4.08. However, a bullish continuation signal isn’t provided until there is a rally above the most recent swing high at $3.61 (B).

Given the possibility of the upside target and the likely completion of the bearish correction at the April swing low (A), traders are likely to look to accumulate during current weakness in anticipation of a bullish continuation. Moreover, if key long-term support is sustained around the 200-Day line, there is the potential to eventually hit a new trend high, above $4.90.

Tuesday’s Reversal May be Just the Start

Also of interest is the sharp bullish reversal that triggered on Tuesday. It showed strong once a low was established. That improvement in demand is likely to last a little longer and therefore another period of strong buying could be seen once the current minor pullback is complete. The reaction of price once a low is established should provide further clues as to the changing supply/demand dynamics.

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