Natural Gas Price Forecast: Declines Below Key Levels, Bears Regain Control

Natural gas failed to progress higher on Tuesday following Monday’s gains and a daily bullish reversal signal. Instead, it retreated following a brief minor advance to 3.74 before encountering resistance. Sellers then took back control and drove the price down. The subsequent decline took natural gas below Monday’s low and the 20-Day MA, now at 3.52. At the time of this writing, it continues to trade below the 20-Day line and near the lows of the day. The low for the day currently was 3.43. That is right around potential support as represented by the internal rising trend line. However, it is showing signs of breaking.

Bearish Reversal Triggers

The decline today triggered a bearish daily reversal on a drop below yesterday’s low of 3.50. And it sets up a potential continuation move to the downside as today’s high generated a lower swing high. Of course, follow through will be key. Note that natural gas may end the day below the 20-Day MA for only the second time since the 20-Day line was reclaimed in October. The first time was Friday. That information combined with today’s bearish reversal shows declining demand for natural gas and sellers getting more aggressive.

Between 3.74 and 3.33

The two key near-term price levels for natural gas are today’s high at 3.74, also a swing high, and last Friday’s low at 3.33, also a swing low. A rise above the 3.74 swing high would trigger a bullish reversal and show strength that may grow. Until then it looks like price behavior may be signaling a deeper correction. A drop below today’s low signals a weakness, with a bearish trend continuation signal generated on a drop below last week’s low of 3.33.

Deeper Correction Possible

Having said that, the recent trend high of 4.20 did reach a potential target zone that included the top channel line of a rising trend. Sellers clearly took back control from there leading to the first leg down (AB) from the top. It was followed by a two-day advance (BC) that likely ended today. This puts natural gas in prime position to keep falling. However, support levels noted above need to be broken first. As of today, the bearish correction has moved into the second leg down in a declining ABCD pattern.

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