Natural Gas Market Update: Assessing Support, Resistance, and Potential Bearish Signals

Natural Gas Forecast Video for 16.01.24 by Bruce Powers

Natural gas pulled back from last week’s high of 3.39 on Monday, falling below Friday’s low to test support at the uptrend line. Today’s low was 3.05, almost an exact hit of the trend line. This is the first specific test of the uptrend line as support since natural gas broke out above the line last Tuesday. It is a minor bullish indication but needs further confirmation. Demand subsequently picked up intraday on Monday leading to a bounce to test Friday’s low of 3.10 as resistance. A daily close above that low will be slightly more bullish than a close below it.

Given that there is a bank holiday in the U.S. on Monday volatility is muted with a relatively narrow range trading day and the possibility of a doji close likely. A doji is created when both the opening and closing prices are the same or close to the same price.

Possible Bearish Double Top

Despite indicators showing overall strength in demand and higher eventual targets, a period of retracement and consolidation may follow last week’s highs. Friday’s test of the 3.39 trend high and today’s pullback, increases the chance that natural gas may have hit strong enough resistance to lead to further profit taking. Moreover, a potential double top bearish reversal pattern has formed on the daily chart with a neckline around 2.95. A breakdown of the pattern is signaled on a move below the neckline. There are several subsequent price areas where support may be seen if the pattern triggers.

Strong Support Should be Seen at the 200-Day MA or Higher

Natural gas could fall all the way down to the uptrend line and 200-Day MA. Yet, there are several interim price levels where support may be seen, as shown on the chart. The 200-Day MA at 2.66 as it is close to converging with the lower uptrend line. This places greater significance on the price area of the 200-Day line. The 20-Day MA is giving bullish indications as it rose back above the 200-Day line last week.

While the 50-Day line continues to slope down, the 200-Day line also has a slight upward slope. Nevertheless, a bullish monthly reversal triggered this month, and it has been confirmed with weekly closing highs above December’s 2.84 high. The assumption being that following a retracement of some degree, natural gas should be ready to test recent highs.

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