Natural Gas Price Forecast: Faces Potential Bearish Breakdown

Natural gas continued to consolidate on Thursday following a failed attempt to advance higher yesterday. It is set to close in a weaker position today, near the lows of the day with a lower daily low and lower daily high. Trading continues near the lows of the day (1.965) at the time of this writing. That price level marked horizontal resistance at the top of the bottom symmetrical triangle formation in March.

It marks a full swing back to test the 2.00 zone as support. That zone has maintained support for more than two weeks, yet it is at risk of failing. Natural gas has been unable to sustain a rise from the 2.00 price area since it was first reached on July 17. Therefore, it remains at risk of testing lower support levels.

Drop Below 1.99 Points Lower

A decisive drop below the trend low at 1.99 puts the 1.94 to 1.92 target zone in sight and crude is heading there now. The lower level is the completion of a 78.6% Fibonacci retracement, and it is the top of a gap from late-April. Since the gap ends in that price zone and since gaps will typically fill eventually, this gap may also fill. If natural gas falls to 1.92 and continues to show signs of weakness, it may fall further and will fill the gap at 1.85, based on one measure. Alternatively, the gap fills around 1.68. That 1.68 price area beings a potential support zone down to an estimated 1.80.

Monthly Low at Risk

Last month’s low support was 1.99. Therefore, a decline below 1.99 has triggered a bearish monthly signal and a daily close below that price level will confirm weakness. If that happens, certainly the lower price zones are at risk of being tested as support before natural gas bottoms.

It is also critical to be aware of support for the month of June, which was at 1.91. Subsequently, a decline below 1.91 will trigger a second bearish monthly signal and therefore increase the chance the natural gas reaches the lower 1.68 price zone.

Bearish Weekly Patterns

Last week ended with a bearish shooting star candlestick pattern and a weekly close at the low for the week. Further, this week natural gas is on track to complete a similar pattern. Unless Friday brings a clear rally in natural gas, it will close in a weak position on the weekly time frame.

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