Navigating the Natural Gas Slide: Key Levels and Future Prospects

Natural Gas Forecast Video for 22.01.24 by Bruce Powers

The bears were back in control of natural gas on Friday as it fell back to where strong upward momentum began the recent rally. Support around the 200-Day MA and uptrend line was broken to the downside today as natural gas heads towards the 78.6% retracement at 2.48. Moreover, today’s decline was clear and definitive as represented by the wide-range red candlestick pattern. At the time of this writing trading continues near the lows of the day.

Weekly Bearish Signal Foretold Decline

A weekly bearish reversal was triggered earlier in the week on a drop below last week’s low of 2.69, before support was seen around the 50-Week MA and 200-Day MA at a low of 2.67. Today we have bearish follow through and further confirmation of weakness on the break below that swing low support level. You can see that the support area was also identified by a couple Fibonacci levels. Essentially, the current retracement is like a mirror image of the ascent that topped at the 78.6% Fibonacci retracement with a high of 3.92. It has made a full round trip from the daily low on January 2, which is when natural gas broke out above the 20-Day MA and accelerated its rally. As of today’s low, a full round trip back to 3.92 has been completed.

78.6% at 2.48 is Next Potential Support

As noted above, the 78.6% Fibonacci retracement is nearby at 2.48 and will likely be reached given how hard prices are dropping today. In addition, the 2.48 price level is further strengthened by the falling ABCD pattern. It completes the CD leg that was extended 200% of the AB leg. That’s the next price level where support may be seen. It is followed by a minor swing low around 2.41.

Today’s price action is dominated by the bears and turns the outlook for natural gas bearish. However, what happens after natural gas reaches support and bounces will be telling. Volatility started to pick up with the prior correction that began from the 2023 high at 3.64. It continued into the next two swings. As long as natural gas remains below the three-moving average (20, 50, 200) as shown on the chart, prices remain heavy and prone to a bearish continuation. At the same time, natural gas is already down by at least 25.9% from the recent swing high (A) in only seven days. A countertrend move should be coming before it falls below 2.41.

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