Natural Gas Price Forecast: Analyzing Consolidation Pattern and Breakout Signals

Natural Gas Forecast Video for 05.02.24 by Bruce Powers

Natural gas remains in consolidation as it further traces out a small broadening formation. It hit a new trend low at 2.02, which is at the lower boundary line of the pattern. This pattern was introduced yesterday as it can give breakout signals as the consolidation range expands. It is defined by two trendlines that are pointed away from each other. After finding support at the day’s low, natural gas had a minor rally, and it was set to close in the green for the day.

Weekly Chart Confirms Weakness

Nevertheless, the week is on track to end in the red and relatively bearish. Natural gas is trading below the halfway point for the week’s range at the time of this writing. The halfway point is at 2.09. Near term support and resistance for the week are at 2.02 and 2.17, respectively. A breakout in either direction may lead to a continuation in the direction of the breakout. However, keep in mind the broadening formation as a sustainable breakout needs to clearly move out of the expanding range of the pattern.

Broadening Formation Continues

The chance of a bearish continuation remains high. However, support around the monthly low of 2.03 has kept a bearish trend continuation from triggering other than in the formation of the broadening pattern. Downward pressure remains and can be seen in the characteristics of this week’s consolidation as there has been a series of lower daily lows and only one day with a higher daily high, on Thursday. In addition, the high Thursday was not much higher than the prior high of the range.

Use Extra Caution if Shorting a Dull Market

Although the situation in natural gas is bearish, there is an old saying on Wall Street, to never short a dull market. Even though the market is bearish, it can go either way as it is sitting at support and has paused the decline this week. A breakdown would be facing several potential lower support levels, starting at 1.98, which is the target for a declining ABCD pattern. That price level is followed by the two previous trend lows at 1.97 and 1.95. If natural gas breaks below the lower level it may be heading to a previous monthly low of 1.80.

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