Natural Gas Price Forecast: Struggles at Resistance, Bearish Reversal in Sight

Natural gas continued to consolidate near trend highs on Friday. It is on track to end the day with an inside day. The high of the day at $4.44 retested resistance near the current trend high of $4.48 that was reached yesterday. However, the day will likely end with natural gas in a bearish position, lower for the day and with a closing price in the lower half of the day’s trading range.

Day Likely Ends Bearish

Although it is not surprising to see another attempt to go to new highs a subsequent intraday selloff puts natural gas at risk of ending the day with a bearish shooting star candlestick pattern. Even though it is a bearish pattern inside an inside day pattern, it shows sellers dominating. The shooting star is typically a stronger bearish indication if it occurs at the top of an uptrend. That would have been yesterday. Nonetheless, in this case the bearish one-day candle follows a bearish candle from Thursday.

Resistance Continues to Hold

Resistance has been seen around a logical price resistance zone marked by a top parallel rising trend channel line. A bullish breakout above the line and therefore the channel was last attempted on January 13, the prior trend high. That new high day also ended the day in a decisive bearish position. Even though there could be more upside before the current advance is complete, the combination of the channel line pattern and the bearish response indicate that the chance of a bearish pullback of some degree is more likely now.

Bearish Below $4.15

A bearish signal will be indicated on a drop below today’s low of $4.15. Yesterday’s low of $4.03 along with the 50% retracement of an internal uptrend at $4.02 is the next potential support area. However, there is confluence of two Fibonacci retracement levels at $3.98, which may make it a more likely target for a minimum pullback. Further down is a possible support zone from $3.75 to $3.73. The behavior around the internal thin uptrend line showing near-term dynamic support should also provide clues as to changes in support and demand. If a deeper pullback does occur, a minimum test of support around that trendline seems likely.

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