Natural Gas Trends: Support at the 200-Day Moving Average Being Tested

Natural Gas Forecast Video for 19.01.24 by Bruce Powers

Natural gas failed to hold support of the 50-Day MA on Thursday and instead fell below it to test the 200-Day MA as support and uptrend line. The low of the day was at 2.67, while the 200-Day line is at 2.66. Moreover, today’s continuation of the bearish retracement completed a 61.8% Fibonacci retracement at 2.68 and got close to the target for an extended declining ABCD pattern at 2.65. The extension uses the 161.8% Fibonacci ratio to extend the CD leg of the pattern relative to the AD leg. Further, the weekly chart shows support of the 50-Week MA at 2.64. In other words, there are several reasons why today’s low price may hold and complete the current correction.

There is little sign of it yet though as the price of natural gas came down hard after a failed attempt to strengthen earlier in the session. A wide range daily red candle represents the failed upside move that led to the sellers taking control of price action.

Testing Support at 200-Day MA

Since it is a long-term trend indicator the relationship of price to the 200-Day MA says something about the health of the long-term trend. More recently, natural gas has been going through a bottoming process. During that process we watch for signs of strength that may indicate something about future prices. In general, if natural gas is above the 200-Day line then there is long-term bias to the upside, and opposite if it is below the line.

Flirting with 200-Day Line for Months

After being below the 200-Day line for many months, natural gas gapped above it on September 27. It represented support until the natural gas fell back below the line on December 6 as it was tested successfully at a swing low in October. Subsequently, it tested the 200-Day line as resistance successfully during a swing back on December 22, before closing back above the line at the start of the year on January 3. Now, we watch for a successful test of the line as support and a subsequent bullish reversal signal. If that happens, then natural gas should be clear to rally again and test recent swing highs.

If Weakness Persists

Alternatively, if natural gas breaks below 2.65, it is likely heading to the next lower Fibonacci level at the 78.6% retracement with a price of 2.48. That would indicate a failure of the 200-Day MA to hold as support and therefore increase uncertainty.

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