Natural Gas Price Forecast: Stuck in Consolidation as it Faces Key Resistance

Natural gas continues to respect resistance around the downtrend line and 20-Day MA as it further consolidated on Thursday in preparation for its next move. It reached a high of 2.86 for the week, which was an exact touch of resistance represented by the downtrend line. Today, natural gas pulled back further from that high to reach a three-day low of 2.69. It remains within a five-day price range. Until there is a decisive rally above this week’s high natural gas remains at risk of a deeper correction.

Bearish Continuation Below 2.635

A bearish continuation would be indicated on a drop below this week’s low of 2.635 (C). The 200-Day MA would then become a target for support around 2.47. There is an interim price level at the 38.2% Fibonacci retracement at 2.55, followed by the swing low of 2.475 from May 28 (A). The May 28 swing low carries significance as it is part of the price structure for the uptrend. A drop below it would violate the higher swing low.

Bulls Watching for Rally Above 2.86

Nevertheless, if this week’s low continues to hold as support and leads to higher prices, natural gas will have completed a new higher swing low as part of the price structure of the uptrend. A decisive rally above 2.86 will trigger a bullish breakout that should lead to a test of resistance around the trend high at 3.16 and is likely to continue to rise and test higher price levels. The first higher target is the completion of a rising ABCD pattern at 3.32. That target is followed by the January 8 swing high at 3.39.

The first bull breakout above the trendline two weeks ago could not be sustained, leading to the current minor pullback. A second breakout may have a greater chance of success as it would represent an important change in the chart given that it has represented trend resistance for a while.

Weekly Close to Leave Clues

Earlier this week natural gas triggered a bearish weekly continuation on the drop to 2.635. Unless it strengthens some during Friday’s session it is on track to close weak, in the lower area of the week’s trading range. Further, it may end with a weekly bearish shooting star candlestick pattern, which can be seen today. Unless there is a new high or low triggered for the week in Friday’s trading session, the halfway point for the week’s range is at 2.75.

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