Navigating Natural Gas: Bearish Signals, Resistance, and Potential Reversals

Natural Gas Forecast Video for 05.12.23 by Bruce Powers

Downward pressure in natural gas continued today with a new trend low of 2.65. Subsequently, support was seen at today’s low leading to a minor intraday bounce. This puts natural gas in a position to possibly close with a relatively narrow bullish hammer candlestick pattern. If it does, a sign of short-term strength will be indicated on a breakout above today’s high of 2.75. However, it will then be heading up into potential resistance around the 50-Day MA at 2.87 and the long-term uptrend line around the same price area. So, if a bounce does come soon, a bearish reversal is anticipated once natural gas hits resistance.

Slightly Lower Target Confirmed by Two Indicators

The next lower target at 2.62 is next in line if today’s low is broken to the downside. That is the completion of a falling ABCD pattern where the CD leg matches the decline in the AD leg. Further, the 200-Day MA identifies the same price area. Note that reaching 2.62 will provide the first test of the 200-Day MA as support since natural gas rose above it on September 27. Prior swing lows follow at 2.55, 2.50, and 2.43. Given that the uptrend line was broken last week, followed by further weakness today, the lower price levels have a good chance of being reached before the current correction is over.

If 200-Day MA Doesn’t Hold a Downside Acceleration is a Risk

In addition, it wouldn’t be surprising to see an acceleration to the downside given the break below the two lines, the 50-Day MA and uptrend line. They had been providing a lower boundary for the rising channel. A breakdown just began and shows a potential failure of the rising trend channel. So far that is the case, but further confirmation is always needed to confirm what is starting to happen with price behavior.

Bearish Flag Triggered on Monthly

If we step back and look at a monthly chart, we can clearly see that last week’s breakdown triggered a bearish flag. The bearish move today triggered a continuation of the breakdown as last month’s low was exceeded to the downside and natural gas is on track to close below that low today.

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