Natural Gas Price Forecast: Wedge Patterns Hint at Potential Reversal

Corrective Low and Historical Declines

Natural gas has reached an interesting position on its chart given a new corrective low of $2.76. That low marked a 62.7% decline from the $7.44 peak in January and the largest bearish correction since the 2024 bottom. Previous downswings ended after a 46.5% decline and 40.1% drop in the price of natural gas. During the current correction, a break below the long-term uptrend confirmed on a weekly basis last week and set to confirm bearish implications again this week, with a bearish engulfing pattern.

Support Levels and Trendline Tests

Nonetheless, natural gas has reached another area of potential support, that could lead to a bounce up into prior support to test it as resistance. There is an interim higher swing low and monthly low at $2.77, as well as the top trendline of a large falling bullish wedge. An upside breakout of the wedge triggered in late-October. This is the second pullback to test the area around the trendline as support. The first time was with the $3.01 swing low in January.

Wedge Patterns and Fractal Analysis

The fractal nature of financial markets may be evidenced in the chart of natural gas, as there is a small falling bull wedge that has formed around recent price action. Since the pattern needs to break out to confirm the pattern, we don’t know yet if the wedge will be verified. Nevertheless, if support continues to hold at or above the top line of the large wedge, then a bullish reversal trigger for the small wedge might follow. Certainly, natural gas is oversold when considering the magnitude of the current decline.

Upside Breakout and Resistance Levels

A breakout of the wedge and bullish reversal will trigger above the lower swing high at $3.25. That high is also a weekly high and will trigger a weekly breakout as well. Potential resistance around the lower uptrend line is also an area to watch for signs. Earlier price levels for possible resistance are at last week’s low of $2.92 and prior swing low at $3.01. A recovery above the lower swing high at $3.66 will be needed before there is a chance at further strengthening.

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