Short-Term Support Zone Under Pressure

For several days, natural gas has been testing support around the 78.6% Fibonacci retracement of a prior upswing. This appears to be a pause in the downtrend, and the expectation remains that the bear trend will resume once the short-term consolidation phase is complete. If a bounce occurs first, the behavior of price near potential resistance zones should reveal more about shifting supply and demand dynamics.

Breakdown Through Key Support

Tuesday’s sharp decline marked a decisive break below a critical support area that had been tested repeatedly in recent weeks. This zone was defined by the confluence of a long-term uptrend line and an anchored volume-weighted average price (AVWAP) from the 2024 trend low. Also included was the April swing low at $2.86, which served as an extended boundary for the zone.

Once $2.86 was broken, a bearish continuation signal was triggered, confirming the continuation of an ABCD decline from the March trend high. The bearish signal was reinforced by a daily close below $2.86. It will establish longer-term bearish confirmation on the weekly chart if the week finishes below that price.

Lower Targets in Play

Downside projections begin with $2.63, the completion of a smaller descending ABCD pattern (purple). Below that, the next target is the 78.6% retracement of a larger upswing than the earlier Fibonacci measure. Given the recent long-term breakdown through major support, the technical bias favors lower levels before the current bearish correction runs its course.

Bounce Scenario

If a rally develops and clears the two-day high of $2.85, natural gas could stage a countertrend move toward a resistance zone between $2.96 and $3.07. The lower end of this zone aligns with the AVWAP level, while the upper boundary is defined by the declining 20-Day moving average. As the 20-Day MA continues to fall, the top of the resistance range will gradually shift lower.

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