Decline Follows Failed Breakout Above the 20-Day MA

The decline today follows a successful test of resistance around the 20-Day MA and top trendline over several days earlier this week. Given that the June 24 swing low at 2.635 failed to hold as support today, it looks like the 200-Day MA around 2.47 will be tested as support before the retracement is complete.

Notice that the 50-Day MA has almost converged with the 200-Day line thereby confirming potential support around the 200-Day line. If the 200-Day line fails to act as support, lower potential targets are identified at the 50% retracement and 61.8% Fibonacci retracement at 2.37 and 2.18, respectively.

Drop to 200-Day MA More Likely

When measuring the full upswing beginning from the April 25 swing low, the 38.2% retracement shows at 2.55. But given the rejection of the price of natural gas as the 20-Day line and subsequent bearish reaction, it is at risk of being broken. Further, this week’s swing high of 2.86 established the BC leg of a descending ABCD pattern.

The pattern completes below the 200-Day MA and near the 50% retracement at 2.34. This would seem to increase the risk of a potential decline below the 200-Day line. The 200-Day line was successfully tested as support on May 28, shortly after natural gas rallied back above the line on May 16. If it falls back below the line and then stays below it, the correction is likely to continue with a deeper retracement or consolidation.

Lower Support Zone Starts Around 2.235

A lower potential support zone, below the 50% retracement, is identified from around 2.235 to 2.18. This week is on track to end, completing the second week down from the June 10 high. Moreover, selling continues to dominate into Friday afternoon. Therefore, next week natural gas is at risk of continuing the bearish decline.

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