Natural Gas Price Forecast: Tests Downtrend Line, Bearish Outlook Persists

Natural gas rose to a four-day high of 2.15 on Wednesday before encountering resistance. The high was a successful test of resistance around the internal downtrend line. Subsequently, sellers took back control and drove the price of natural gas to lows for the day.

At the time of this writing, it continues to trade near the lows of the day. Since the attempt to go higher was met by resistance at the trendline, the downtrend may continue to progress. There have been no sustainable bullish reversal signals and consolidation continues near the lows of the trend.

Resistance at Trendline Sustains Bearish Sentiment

Encountering clear resistance at the trendline is a bearish sign and therefore the bear trend is retained. Lower prices are at risk of being tested as support but first a bearish confirmation signal is needed. That would not be provided until there is a drop below the trend low of 1.99. Lower targets would then be in line to be tested. There are two lower target zones. The first is from 1.94 to 1.92, consisting of an interim swing high (now potential support) and the 78.6% Fibonacci retracement, respectively.

1.85 Begins a Price Range

Lower down is a larger potential range of support starting at 1.85. If reached, the upside gap from late-April will be filled. The April swing high is near the completion of a descending ABCD pattern with the CD leg extended by 200% of the AB portion of the decline. It is at 1.83. Finally, the mid-point of the bottom symmetrical triangle pattern at 1.80 is marked as a potential support level.

Rally Above 2.15 Needed for Bullish Sign

Bearish implications will start to change if there is a clear bullish signal. Once Wednesday is complete, a bearish signal will be indicated on a rally above today’s high of 2.15. Natural gas would then be above the downtrend line and about to encounter potential resistance around the purple 20-Day MA, currently at 2.19. Notice that the 20-Day line is falling towards today’s high. If a bullish breakout occurs once the two lines have converged or are close, a stronger signal will be indicated. Further, once there is a daily close above the 20-Day line, natural gas should be ready to progress higher.

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