Natural Gas Price Forecast: Faces Bearish Pressure After Resistance Test

Natural gas fell to a three-day low of $4.13 on Friday, indicating that it might pull back further to test lower support levels. A breakdown of an inside day was triggered today with a drop below $4.25, while further weakness was shown by a decline below Wednesday’s low of $4.23. This is a bearish price action reflecting short-term downward pressure. It follows a new trend high of $4.55 that was reached on Tuesday thereby testing resistance around a top rising trend channel line. Resistance was seen around that line several times before.

Dynamics of Pullback May Provide Clues

Until today, a bullish continuation was possible as resistance around the top channel line continued to be tested over the past couple of days and resistance was retained. The subsequent bearish decline today, however, makes a deeper pullback more likely prior to a new breakout attempt. But that will also depend on what happens next.

Key Trend Support at 20-Day MA

The obvious potential trend support area is represented by the 20-Day MA, now at $3.97. Notice that it aligns with an internal uptrend line. Together, they represent a more significant possible dynamic support area. A pullback prior to another bullish breakout attempt would be normal and healthy for the developing bull trend.

Recent bullish indications that support an eventual move higher, include a sharp bounce off support on Monday defined by the convergence of the 50% retracement, the 20-Day MA, and the 50-Day MA. Moreover, the 20-Day line crossed above the 50-Day line, and natural gas reached a new trend high. This behavior shows strong underlying demand. However, if there is a decline below the 20-Day MA and natural gas stays below it or keeps falling, the near-term outlook and a chance for a new trend high begins to fade.

Weekly Bullish Engulfing Pattern Supports Further Upside

This week will end with a bullish engulfing pattern that is also a key reversal week. Where the price of natural gas ends the week may provide additional insight. A weekly closing price above last week’s high of $4.19 would confirm the weekly breakout, but a close above the three-week high and prior trend high at $4.48, would show greater strength. Despite the potential for a deeper bearish decline, that would begin to change on a sharp rise above today’s high at $4.43. This could be of particular interest if the day ends with a bullish hammer candlestick pattern.

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