Natural Gas Price Forecast: Reaches Key Support, Bearish Momentum Builds

Natural gas continued its bearish retracement on Thursday, completing a 61.8% Fibonacci retracement at 3.03, and finding support at a low of 3.035 for the day. Thursday is on track to end as a bearish engulfing pattern and it may close weak, below Wednesday’s low of 3.06. This is a bearish one-day pattern that shows sellers remaining in control heading into Friday’s trading session. At the time of this writing, natural gas is set to end the day in a weak position, indicating that further testing of a support zone that starts at the 61.8% level is likely.

61.8% Fibonacci Retracement Completed

A support zone is indicated around the 61.8% retracement level as a prior interim swing high was at 3.02 and an internal uptrend line is close by. However, if that price zone fails to show support, the next lower level to consider is around a trendline at approximately 2.82. That line is the top boundary line of a large symmetrical triangle pattern. Further down is a potentially more significant support zone identified by both the 200-Day MA at 2.68 and the 78.6% retracement at 2.67. When two or more indicators point to a similar price area, it is one way that the market provides clues.

200-Day MA is Most Significant

Although the 200-Day line was successfully tested as support initially following a reclaim of the line on September 11, the current retracement is at a larger scale of the trend structure. Nonetheless, it would be expected to hold as support if tested given its long-term significance as a trend indicator. It is also interesting to note that the triangle apex crosses right at the 78.6% retracement level.

One way to identify a possibly failure of a bull breakout from a symmetrical triangle is the center line of the pattern (where boundary lines cross). The idea being that if the bulls remained in charge overall following a bull breakout of the pattern, the price would not be able to fall back below the midpoint, as it shows relative weakness that is getting worse.

Month of January Likely Ends Very Bearish

As noted previously, with one trading day remaining till the end of January, the developing monthly candlestick pattern (not shown) is likely to end in a bearish position. Today’s decline dropped the low for the month of January to 3.04, which increasing the chance that natural gas will end the month in a very bearish position on the monthly chart.

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