Navigating Natural Gas: Assessing Support Zones Amidst Decline

Natural Gas Forecast Video for 17.01.24 by Bruce Powers

Natural gas drops further from recent highs on Tuesday, breaking below yesterday’s low of 3.10 and falling hard. Selling has dominated most of the session and trading continues to occur near the lows of the day. Today’s wide range red candle hints at a deeper retracement and test of lower support levels. Moreover, natural gas is back below its uptrend line at the lower end of the rising parallel trend channel.

Targets Next Support Zone From 2.88 to 2.81

Natural gas is rapidly dropping towards the next lower potential support zone that looks to be from around 2.88 to 2.81. The lower level of the range is the 50% retracement level, and it is strengthened by the 50-Day MA, which is at 2.82. However, given the decisiveness of today’s decline, it may retrace to a lower price zone from around 2.68 to 2.65, consisting of the 61.8% Fibonacci retracement and the 200-Day MA, respectively. The 200-Day line along with the lower uptrend line mark the lower support zone.

Recent 3.39 High Completes a 51.8% Rally, Eyes Deeper Retracement

Last week’s high of 3.39 completed a rapid 1.16 point or 51.8% rally in only 17 days and completed a 78.6% Fibonacci retracement as well. So, it wouldn’t be surprising to see a deeper retracement and/or consolidation phase following such a move. In addition, a double top formation is present on the daily chart. The 78.6% retracement is generally the maximum anticipated retracement in Fibonacci ratio analysis. There is also an 88.6% retracement that is sometimes used, but that is less commonly reached.

200-Day MA is Key Trend Indicator

Natural gas broke above the 200-Day MA in late September. A subsequent test of the line as support was attempted in late-November and it failed to hold, leading to a continuation lower and a successful test of the long-term downtrend line as support at the recent December swing lows. The current retracement, if it continues lower, will be a second attempt to test support around the 200-Day line. If price is rejected before or at the line a bullish outlook for natural gas is maintained. However, if a daily close occurs below the line and it is followed by a continuation lower, further bearish price action may be in the works.

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