Natural Gas Price Forecast: Challenges Trend Support at 20-Day MA

Natural gas continued its bearish pullback on Wednesday, reaching a low of $4.07 and finding support for the day at the 20-Day MA (purple). The low of the day was a six-day low and the 20-Day line is now at $4.11. A test of support at the 20-Day MA followed a bearish reversal of a one-day shooting star candlestick pattern from Monday. Trading continues to be dominated by the sellers as the price of natural gas remains near the lows of the day at the time of this writing. Therefore, a lower price may be seen before the end of Wednesday’s trading session.

Second Test of Support at 20-Day Line

Following a swing low of $2.99 from late-January, natural gas reclaimed its 20-Day MA on February 13. Shortly thereafter, the advance accelerated and subsequently encountered resistance around the top trendline of a large rising parallel trend channel. That led to a decline and an eventual higher swing low at $3.74. Support around the 20-Day MA and the 50-Day MA (orange) were successfully tested around the swing low as it was followed by a bullish key reversal day. The current decline is testing support around the 20-Day line for the first time it was tested in mid-February.

Two Lines Show Dynamic Trend Support

Initial dynamic trend support for the current bearish pullback is around the 20-Day MA and internal uptrend line. If support is maintained around those lines, then the structure of the uptrend from $2.99 remains intact. But a decisive drop below both lines will indicate the potential for a deeper retracement. But further signs of weakening would be needed to further confirm the breakdown.

There is always the possibility of a false breakdown that quickly reclaims the trend support lines. The 38.2% Fibonacci retracement level at $4.17 failed to show support on the way down today. This opens the possibility of an eventual test of support around the 50% retracement level at $3.95. Of course, the 20-Day line and trendline would be broken before then.

Strong Resistance at Top Channel Line

Resistance has been encountered around the top line of a rising channel multiple times since the December interim swing high. On Monday, a bullish breakout of the channel led to a new trend high of $4.90 and then a failure of the breakout given the quick bearish reversal and subsequent downside continuation. Therefore, it is possible that a bearish correction could test lower support levels, below the trendline, before it is done.

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