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Navigating Natural Gas: Channel Breakdown and Support-Resistance Dynamics

By:
Bruce Powers

Natural gas faces selling pressure with a shooting star pattern, prompting analysis of support levels.

Natural gas plant, FX Empire

In this article:

Natural Gas Forecast Video for 11.12.23 by Bruce Powers

Natural gas consolidated on Friday with trading occurring inside yesterday’s range. It is on track to close with a shooting star candlestick pattern indicating the selling pressure remains. Yesterday, support was found at 2.49, right around the minor swing low from September, which is also a monthly low. A more significant possible support area lies a little lower in a range from 2.44 to 2.425. That range starts with a completion of an ABCD pattern with the CD leg extended by the 127.2% Fibonacci ratio and ends with a prior swing low and monthly low from August 24.

A graph with lines and numbers Description automatically generated with medium confidence

Monthly Support of 2.425 Holds Significance

The August 24 low has particular significance as it is part of the price structure of the rising trend channel. A decisive daily close below it further confirms a breakdown of the rising channel. The channel can also be considered a bear flag when backing out to see the bigger picture on the chart. Regardless, at some point natural gas is likely to find support and rally to test prior support as resistance. The key areas for resistance are the 21-Day MA at 2.87 and the lower rising channel line. Higher up is a prior swing high at 2.99 and the 50-Day MA around 3.05 currently.

Decline of 31.7% from October High

Natural gas has fallen as much as 31.7% from the October 27 swing high. That drop exceeds prior corrections that followed the April trend bottom. The sign of strength will occur on a breakout above todays inside day high of 2.61. Yet, a more confident breakout occurs above yesterday’s high of 2.62. If natural gas can close above yesterday’s high, it will have a chance to rally up to test resistance.

Bearish Continuation of Monthly Chart

There was a bearish continuation signaled recently on the monthly chart. When taken with the breakdown of the bear flag, a test of lower support levels would not be a surprise. The question is, does it happen with the current decline or following a bounce.

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About the Author

Bruce boasts over 20 years in financial markets, holding senior roles such as Head of Trading Strategy at Relentless 13 Capital and Corporate Advisor at Chronos Futures. A CMT® charter holder and MBA in Finance, he's a renowned analyst and media figure, appearing on 150+ TV business shows.

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