Natural Gas Price Forecast: Bearish Reversal Signals Pullback

Natural gas triggered a daily bearish reversal on Tuesday as it fell below Monday’s low of 2.155. A daily bearish shooting star candlestick pattern was generated on Monday. It points to a pullback that may be short lived. Today’s price range establishes a lower daily high and lower daily low for the first time since the rally began a week ago. Given that today’s price action is on track to complete a second shotting star candlestick, a pullback to test support before a continuation higher look very likely. Plus, natural gas is on track to close in the lower quarter of the day’s price range at the time of this writing.

Drop to 20-Day MA at 2.09 Next in Line

A decline below today’s low of 2.14 will trigger a bearish continuation of today’s pullback. The 20-Day MA at 2.09 looks to be the first area to watch for support. If it fails to hold, there is a price zone to watch from around 2.03 to 2.02, and it includes the 61.8% Fibonacci retracement at 2.025. One of the reasons that natural gas is anticipated to continue higher following a pullback is that it triggered a bullish weekly reversal signal last week on a rally above the three-week high at 2.15.

Weekly Reversal Just Getting Started

A reversal week completed last week, and the week ended strong, in the top quarter of the week’s trading range. Also, the week ended above 2.15 at 2.16. Moreover, Monday’s rally triggered a bullish continuation of the weekly chart. This was the first time in eight weeks that natural gas exceeded the high of a prior week. These signs of strength should lead to further upside.

Since the 20-Day MA was cleared last week with a rally above 2.10, natural gas is showing strength that may result in a continuation of the current advance up to the 50-Day MA, now at 2.42. Prior to that price level there is the 38.2% Fibonacci retracement at 2.37, while the 50% retracement is at 2.42.

Watching for Clues During Pullback

Characteristics of the current pullback should assist in determining short-term underlying strength in natural gas. A bullish reversal following a test of support at the 20-Day line would be a stronger sign than a drop to test support around the 61.8% Fibonacci level at 2.025, for example.

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