Key Support at 50-Day Moving Average

The decisive decline in the price of natural gas looks to be heading for a test of support around 50-Day MA, now at $3.48, and a recent higher swing low at $3.45. If support fails around the 50-Day line, then the 200-Day, currently at $3.36, will probably be on the agenda. Since the 50-Day MA was reclaimed on June 2, there has been one pullback to test the 50-Day MA as support. It was successful and followed by a rally to new trend highs for the short-term uptrend. Therefore, this second test of the line should provide clues about supply and demand. If it fails to lead to a bullish reversal, a deeper retracement or consolidation may follow.

Near-term Channel at Risk

Despite the trend lines and moving averages on the chart marking various dynamic price levels, the bigger picture is one of consolidation, with a low at $2.86 and a high at $4.90. Inside that larger consolidation pattern is a rising trend channel, begun from the April swing low. That channel pattern may continue to evolve or fail. A continuation of the pattern triggered last Tuesday. Nonetheless, a potential failure of the pattern would first be indicated by a drop below the interim swing low at $3.45. That would show a failure of both a lower trendline and 50-Day MA to show support.

Touch of Lower Channel Line Likely

Otherwise, the expectation is for support to be found near the lower support zone of the price channel and then turn back up. That would lead to the possible continuation of the rising trend channel. As the past couple of days have shown, an advance that rises into a consolidation zone may find resistance before going to too far.

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