Natural Gas: Testing Support and Implications for Future Prices

Natural Gas Forecast Video for 09.11.23 by Bruce Powers

Natural gas fell again today and successfully tested the internal uptrend line as support. Once the line was reached an intraday bounce followed. The internal trendline starts a support zone that goes down to the 78.6% Fibonacci retracement at 3.03 and includes the 50-Day EMA at 3.04.

Expecting Successful Test of 50-Day EMA as Support

Certainly, natural gas can drop below the current support zone and keep falling. However, the combination of the uptrend line and 50-Day line in particular give good reason to believe that it will continue to hold as support. Although a short decline below the zone followed by a quick recovery could happen and retain the overall bullish outlook for natural gas, a close below the zone may lead to further weakness and a continuation of the correction. Staying above it retains the underlying bullish outlook indicated by the rise above the 50-Day EMA and increased slope of the internal rising trendline.

200-Day EMA Fails to Hold as Support for Second Time

Tuesday’s close was below the 200-Day EMA and today there is follow through to the downside. A break back below the 200-Day line is a sign of weakness by itself and a second close below the line further confirms that weakness. It had a chance to successfully act as support following the October 27 swing high as it was the second attempt to test the line as support. The first followed the October 9 swing high and it also failed. Therefore, there are now two failed attempts to test the 200-Day line as support. This behavior of price around the 200-Day line is a sign to be cautious as natural gas is not as strong as it could be given the break below the 200-Day line.

Rising Angle of Ascent at Risk

Natural gas has struggled since the second bottom of the downtrend completed in April. The advance above the 50-Day EMA on September 27 and the subsequent successful test of the line as support on October 23 indicated a rise in the slope of the uptrend, a bullish sign. Further encouragement for the bulls was provided on a rise above the 200-Day line. Subsequent price action indicates that the 200-Day referenced trend is at risk but the intermediate trend, represented by the 50-Day EMA is strengthening.

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