Natural Gas Price Drops to Nine-Day Low, Fueling Market Concerns

Natural Gas Forecast Video for 02.08.23 by Bruce Powers

Natural gas price correction not yet over as it drops to a nine-day low of 2.53. Yet, it is on track to close above the small downtrend line marking support, which is a minor sign of strength. Of concern, however, is the fact that it will end today below the internal uptrend line that previously marked support. In addition, it is closing below the 34-Day EMA (orange), now at 2.59. This behavior is short-term bearish and increases the chance for a deeper retracement to at least test the last swing low of 2.48, if not fall below it.

Potential Retracement to Test 2.48 Swing Low or Go Below

If the 2.48 swing low is broken to the downside natural gas first heads towards the bottom uptrend line. Lower still is the 61.8% Fibonacci retracement at 2.42. Given the current price structure for natural gas, in around four days the uptrend line will be above the Fibonacci level. Further, a falling ABCD pattern has been added to the chart. It completes at 2.40, which would be two cents below the uptrend line. That is where the CD leg of the decline matches the price depreciation seen in the AB leg and it will show symmetry between the two swings.

Rising Parallel Channel Pattern is Dominant

Stepping back, we see that natural gas has been in a rising parallel channel for the past several months. It is common in a rising channel for prices to swing from the bottom of the channel to the top and then back down to the bottom again. As reflected in the rising slope of the internal trend line, upward momentum had been increasing. It looked like the rate of change of the advance might be improving. After today that possibility is suspect. Of course, what happens next will be telling as more clues will be provided.

Although a drop below the uptrend line would occur to meet the ABCD pattern target, if the recovery is quick the impact may be muted. What will be of concern though is if natural gas closes below the 2.40 pattern target.

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