Natural Gas Price Forecast: Holds Support as Bearish Momentum Slows

Natural gas continued to test a key support zone on Thursday, hitting a brief new corrective low of $3.19 before bouncing. The area around the 88.6% Fibonacci retracement at $3.21 has been tested as support for three days now within a series of five lower daily lows. In addition, resistance for several days has been seen around the lower line of a descending trend channel. On the accompanying chart there are two blue trendlines marking the boundaries of the original channel.

A 25% extension has been added to the lower end of the channel with a lower green boundary line. Support was seen around the lower extended line on Tuesday and last Wednesday. Since support around the 88.6% zone continues to hold, there is the potential for a bullish reversal that may signal the completion of the bearish correction.

Bearish Sentiment Dominates

Despite downward pressure, natural gas will complete an outside day as there was an advance above Wednesday’s high of $3.32 to $3.33 today. Recent highs indicate that the market seems to be recognizing the declining channel lines. Although natural gas continues to show weakness as it may end the day at its lower daily closing price for the corrective decline, which previously was $3.27 from Wednesday, it may close today below the lower boundary line of the original channel (blue lines).

Optimism May Return Above $3.33

Nevertheless, a decisive rally above Thursday’s high of $3.33 triggers a one-day bullish reversal and reclaims the lower end of the original channel. A daily close above today’s high would then be needed to confirm strength. There are two initial potential upside targets, while the middle green dashed line of the channel can help as a guide. The first upside target is the most recent interim lower swing high at $3.61, followed by the 20-Day MA, currently at $3.73. Keep in mind that since the 20-Day line is falling it may reach the area around the $3.61 level or lower before it is tested as resistance.

Lower Support Zone Starts at $3.19

On the downside, if natural gas continues to fall below $3.19 and keeps going, there are several reasons that support may be seen within a range of $3.08 to $2.99. The potentially significant 200-Day MA is within that range at $3.06 currently.

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