Navigating Natural Gas: Analyzing a Sharp Decline and Future Scenarios

Natural Gas Forecast Video for 28.11.23 by Bruce Powers

Downward pressure in natural gas continues to dominate price action today as it breaks below the rising trend channel to find a low of 2.71. Today’s low exceeded the 78.6% Fibonacci retracement at 2.785 and flirted with support just above the 88.6% Fibonacci retracement at 2.68. The gap from September 27 further filled today and will completely fill if the price of natural gas falls to 2.67. Given that the bottom trendline of the rising channel was broken, a full gap fill seems more likely now.

Breakdown from Rising Channel

Nevertheless, intraday support was seen from today’s low of 2.71 leading to a bounce. At the low, the price of natural gas had corrected by 25.6% from the recent peak of 3.64. That’s the largest decline in natural gas since the 35.7% drop seen following the March 2023 peak at 3.03. It shows real selling pressure in natural gas. As well, it adds a question to what happens next. Natural gas failed to hold above its 50-Day and 200-Day EMA recently and is continuing to sell off following the recent drop below the 50-Day EMA a week ago from last Friday.

Current Correction Exceeds Prior

There have been five corrections following the bottom in April 2023. They range from 14.6% to 20.4%. The current correction is a potential change in character, and it is joined by a bearish breakdown from the rising channel. Given how clearly prices continue to fall, lower price levels become more likely to eventually be reached. The monthly swing low of 2.424 is a key level as a drop below it will violate the rising trend structure. A little above that level is another monthly low of 2.50.

Quick Recovery Could Negate Bearish Signs

We will be watching what happens next carefully. A relatively quick recovering that takes prices back above the uptrend line could negate the potential for further bearish developments. This would be the case if it is followed by continued signs of strengthening. A daily close above last Friday’s high of 2.95 would provide a clear sign of strengthening. From there, prices would need to further strengthen to negate recent bearish developments.

For a look at all of today’s economic events, check out our economic calendar.