Natural Gas Price Forecast: Bearish Shift Signals Deeper Correction Risk

Natural gas had a bearish change of character on Friday as it fell hard to a six-day low of $3.83. Downward pressure remains, as trading continues near the lows of the day at the time of this writing. The low of the day tested potential support at the 78.6% retracement. That put natural gas back below the 50-Day MA for the first time in five days.

Although this pullback could complete a short-term decline but given the relatively consistent selling throughout Friday’s session, there is a heightened risk of further downside, especially since the weekend is coming next. It is important to note that the trendline on the relative strength index (RSI) remains unbroken, indicating sustained downward pressure on prices.

Sellers in Control

A weak closing price today, near the lows of the day’s trading range, would keep natural gas in a position to easily challenge the prior swing low support of $3.73 and the 61.8% Fibonacci retracement at $3.72. There is also a 161.8% extended target for a small descending ABCD pattern (not shown) that points to $3.69 as a potential pivot area. Together, these targets identify a possible support zone from $3.73 to $3.69. And the is a rising trendline nearby as well.

Heighted Global Volatility

Given the heightened volatility in the global markets due to an escalating trade war, more significant potential swings in the price of natural gas need to be considered. There is a large rising parallel trend channel that is outlined in purple on the chart. That is a long-term pattern and therefore it can have a dominating impact on shorter patterns. A similar situation may be unfolding in silver relative to its rising channels. Of course, there is always a chance for a breakout through either the top or bottom line of the channel. But if that does not happen and a reversal is indicated instead, there is always the chance that the other side of the channel will eventually be reached.

Trend Channels Point the Way

Natural gas triggered a failed bullish breakout of the large channel on March 10. The subsequent high of the trend at $4.90 was quickly followed by the current bearish correction. Around that top was the top of a second and shorter trend channel starting from an August 2024 interim swing low. The lower end of the shorter channel is the next lower trendline. A break below that line opens the possibility of natural gas eventually testing the long-term lower trend channel line (purple). Whether it reaches there or not it indicates selling pressure on a daily close below the next trendline.

For a look at all of today’s economic events, check out our economic calendar.