Breaking Down Natural Gas: What’s Ahead in the Market?

Natural Gas Forecast Video for 16.10.23 by Bruce Powers

Natural gas breaks down from an inside day and drops to a low of 3.21 before a minor intraday bounce occurs. The low for the day at the time of this writing was the lowest price for natural gas in five days. Nevertheless, it remains in a relatively tight developing consolidation near the highs of the current advance and holding above support of the 200-Day EMA, now at 3.18. Further, the five-day low is around 3.17.

Near-Term Support at 5-Day Low and 200-Day Line

The five-day low is being used to mark the bottom of the consolidation pattern as a break below it will signal both a drop through the bottom of the pattern and a decline below the 200-Day EMA. Upward momentum has stalled as the relative strength index (RSI) oscillator turns down from an overbought level of 73.88.

The 200-Day line is key to the aggressiveness of the rally. If it continues to hold as support during weakness and culminates in a bullish reversal, it indicates a strong trend. Likewise, a drop to the 38.2% Fibonacci retracement at 3.12 will put natural gas back below its 200-Day line. But a bullish reversal from that price level will also indicate strength, just a little less than if price was rejected from the 200-Day line. It was previously resistance until last Friday. Now, the bullish case is indicated if it behaves as support on its first test following a rise above it.

Further Weakness Also a Possibility

Regardless of the above possible signs of strength following a minor pullback, there is clearly the potential for natural gas to test the previous trend high as support around 3.02. If the retracement continues lower that 3.02 level is the more significant area for support that might then be followed by a continuation of the advance.

Potential Bearish Reversal on the Weekly Chart

Another way to look at the current situation is seen on the weekly chart. This week is set to close as a reversal candle on the weekly chart. A new trend high was reached earlier in the session but it was followed by a bearish reversal with natural gas on track to close near the low of the week’s range. Therefore, a drop below this week’s low of 3.21 triggers the reversal.

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