Natural Gas Price Forecast: Faces Bearish Pullback After False Breakout

Following a false bull breakout on Monday, natural gas triggered a breakdown from a potentially bearish one-day shooting star candlestick pattern on Tuesday, but momentum subsequently died. At the time of this writing, it is set to complete a relatively narrow range day from $4.38 to $4.59.

A drop below Monday’s low of $4.45 triggered the shooting star pattern, yet the decline found support relatively close by at $4.38. Where the day ends should provide clues. A daily close below $4.45 would confirm a breakdown from the bearish candle, while a closing price above that level shows less selling pressure than might be expected.

Signs of Bearish Continuation

Tuesday’s price action established a lower daily high and lower daily low. It is important to notice the day’s high as it shows a successful test of resistance at the nearby trend line. In other words, natural gas found resistance at the trendline, which was support during Monday’s sharp rally above the line. This can more easily be seen in an intraday chart (not shown).

It indicates that the market has recognized the price area around the line as it has done more than a few times since late December. This is short-term bearish behavior that points to a likely deeper decline. The trendline is the top parallel trend channel line for a large channel where the bottom trendline connects to an August 2024 swing low.

Potential for a Test of Trend Support at $4.08

A drop below today’s low of $4.38 will signal a continuation of the bearish pullback. The current advance, beginning from the $2.99 swing low from January 31, shows potential trend support around the 20-Day MA at $4.08 and an internal uptrend line. More significant potential support is around the 50-Day MA, now at $3.81. Moreover, the recent interim swing low at $3.74 is significant in that it partly defines the price structure of the uptrend.

Short-term Bullish Above $4.59

Nonetheless, natural gas remains in a developing uptrend formation in the near term and should recover once it has completed a deeper pullback, if that is what is to come. If the price exceeds Tuesday’s high of $4.59, it is advisable to consider the upper trendline as a resistance level. Otherwise, a daily close above the line could lead to prices rising instead of a pullback.

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