Natural Gas Price Forecast: Faces Bearish Pressure Below Key Trendlines

Natural gas pulled back on Thursday, falling below Wednesday’s closing price to reach a low of $3.47. The low for the day was $3.47 and therefore natural gas is set to end the day with an inside-day pattern. It will also likely close below an uptrend line that is the bottom of a parallel trend channel (blue). At the time of this writing, natural gas continues to trade in the lower half of the day’s trading range and looks likely to close in a similar position.

Back Below Trendline

The likely daily close below the uptrend line is bearish, and more so since it follows a decline after finding resistance around a key short-term price zone. Wednesday’s high of $3.83 found resistance a little below the 50-Day MA, which had previously denoted as trend support. That is potentially bearish by itself as the progression of a bear trend typically rises to test prior support as resistance before it continues lower.

Also, notice that resistance was seen both yesterday and today around the middle line within the falling channel (red). There are also two prior interim price swing lows at $3.73 and $3.74, that now mark potential resistance. Finally, potential resistance around the 20-Week MA is at $3.71.

Bearish Continuation Remains a Risk

In other words, since a close below the trendline is bearish, and resistance was seen over several days in an area of confluence, there remains the potential for a bearish continuation of the corrective decline that followed the recent peak of $4.90. Moreover, a declining channel remains in place and natural gas continues to trade below both the 20-Day and 50-Day MAs.

Therefore, although a rise above today’s would be a sign of strength given that the uptrend line and middle channel line would have been reclaimed, natural gas would be heading into prior consolidation and potential resistance around the 50-Day MA, now at $3.88, and the 20-Day MA, at $3.92 currently. Moreover, the relative strength index (RSI) remains in a downtrend and may establish a lower swing high.

What Happens Next More Helpful

One or a few days more of price action should begin to clarify the developing patterns. A 78.6% retracement was completed yesterday on the way to support at $3.34. Since a sharp rally followed, it showed buyers back in charge. Therefore, new bullish signs, starting with a rally above today’s high, should be seen as follow-through to renewed strength. If not, indicated by a drop below $3.46 and $3.34, then further downside becomes likely.

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