Market Overview
Natural gas prices have experienced a significant decline, breaking below multiple support levels and reaching a 28-day low of $2.99. The downward momentum has been confirmed by a series of price movements, indicating a shift in control towards sellers in the market.
Technical Analysis
The selloff began with a drop below Wednesday's low of $3.20, which was quickly followed by a decline below the interim swing low of $3.12. The failure of the 50-day moving average to hold as support has triggered a bearish trend reversal signal, suggesting that short-term momentum is now firmly in favor of sellers.
Natural gas futures closed down 6.43%, falling below both the 20- and 50-day moving averages. This breakdown indicates that sellers are likely to continue dominating price action in the near future.
Bearish Structure and Future Targets
The recent price action reflects a broader bearish trend that has been developing since the spike high of $7.44 in January. The recent high of $3.40 is now considered a lower swing high within this bearish context. The decline below $3.16 has confirmed a bearish reversal, with potential downside targets including the April low of $2.50.
A daily close below $3.02 would further confirm the bearish trend reversal and increase the likelihood of reaching lower targets.
Key Support Levels
Key support levels to watch include a higher swing low from May at $2.86 and the 61.8% Fibonacci retracement level. Given the strong bearish momentum, a test of this support area is anticipated. If these levels fail, it would reinforce the developing bearish structure.
The weekly chart indicates that the 20-week moving average, currently near $2.99, is a critical support area. A bounce from this level could lead to a test of previous support zones as resistance, while a failure to hold could result in a continuation of the broader decline.
Conclusion
In summary, while the short-term momentum for natural gas remains bearish, the ability to hold above the 20-week moving average will be crucial in determining whether a temporary rebound occurs or if the broader decline resumes. Traders should remain vigilant as the market navigates these critical support levels.