Natural Gas Price Forecast: Failed Breakout Signals Bearish Shift

Natural gas hit a new trend high of 4.37 on Monday before sellers took back control and drove it lower. A rise above 4.20 triggered a bull breakout and showed strength. But, at the time of this writing, sellers remain in control with trading continuing near the lows of the day, which was 3.845.

This puts natural gas in a position to possibly close the day below the 4.20 level and indicate a bearish reversal day and likely failure of the bullish breakout. Therefore, it could lead to a deeper pullback or consolidation. In addition, the day looks likely to end in a weak position, in the lower third of the day’s price range.

Bearish Reaction May Continue

Certainly, today’s bearish reaction to new highs seems to lower the chance for a new trend high in the short term. At least until after there is a test of lower support levels. There are a few things to be aware of. Notice that resistance was seen around the confluence of several technical price targets, beginning with 4.33. A rising ABCD pattern (purple) reached its initial target from the pattern and therefore identified a possible pivot level. So far, the market reaction confirms this.

Upside Target Reached

In addition, to completing a target for the ABCD pattern today, a breakout above the top trendline of a rising channel also triggered on the way to 4.37. Resistance was seen around that line on the most recent swing high of 4.20. So, today’s price action shows a failed breakout of the channel. Once a failure occurs, the possibility of a swing in the other direction increases. That is what is being shown so far.

Key Support Anchored by 20-Day MA

The first lower trend support area is around the 20-Day MA, now at 3.62, along with an internal uptrend line. Moreover, the 20-Day line can be combined with the 50% retracement at 3.67 and the 2023 swing high of 3.64. The 2023 high has some significance and therefore a solid chance of being tested as support during a correction. Having the 20-Day line and 50% retracement nearby increases the chance for signs of support.

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