Natural Gas Price Forecast: Natural Gas at Risk of Lower Pullback

Natural gas stalled its rise on Thursday and reversed to trigger a bearish continuation of the retracement. It is now back below the 20-Day MA, and it is on track to close below it today. Further, the 61.8% retracement level at 2.74 failed to stop the decline. Natural gas looks to be on its way to trigger a breakout failure for the bull pennant. It looks to be rapidly approaching the center of the pennant triangle formation at 2.70.

That center line defines the symmetry of the pennant and is being used to identify a potential support level. If it is broken that provides a bearish indication. While, if it leads to a bullish reversal, the potential for the bull trend to continue in the near-term improves. If the 2.70 price area fails to hold as support, then the pennant breakout is failing. If so, the trendline breakout has also failed. Lower down is the more significant 200-Day MA at 2.47.

Breakout Above 2.95 Needed for Bullish Sign

On the upside, a new bullish signal is indicated on a decisive rally above today’s high of 2.95. A daily close above that high will then be needed to confirm the breakout. Notice that Wednesday’s high closed technically above the line, but not by much. The result is seen in today’s weakness. Also, keep an eye on the interim swing high of 2.92. It was also exceeded today but subsequently failed to follow through. It should be watched in conjunction with the downtrend line.

Deeper Retracement More Likely

Natural gas recently completed a greater than 99% rally when starting from the April 25 swing low. Further consolidation and or retracement would not be surprising following such a move. Nevertheless, how the price of natural gas responds in the pullback is going to be more revealing. Both the prospect of a deeper retracement, or a bullish continuation remains a possibility.

Yesterday’s bullish reversal off the 20-Day line showed promise but given the bearish response today, uncertainty dominates. The weekly chart provides support for a possible deeper correction as a bearish shooting start candle triggered to the downside earlier this week. If this week’s low price is broken the weekly chart will take on greater meaning.

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