Natural Gas Faces a Critical Break in Support: What’s Next for Prices?

On the way to the lower canal line

It seems likely that natural gas will test support around the lower trend channel line. Today’s decline breaks two key trend indicators and follows the 200-day EMA’s failure to hold support. The 50-day EMA and internal uptrend line have been broken to the downside. This follows a valid attempt to stay above the 50-day line since September 27. Not only can faulty patterns lead to rapid moves, but rejection of both moving averages puts the natural gas uptrend channel at risk of failure. It’s not here yet, but a test is coming soon.

Natural gas targets 2.79

The lower boundary of the pattern, which represents dynamic support for the uptrend, is located around the lower uptrend line. It is priced today at around 2.79. Not only does the lower line provide potential support, but the line has been hit by price approximately six times. This makes it a very strong line, both for potential support and considering the significance of an outage. Today, how natural gas behaves relative to the lower channel will be key to identifying clues about what might happen next.

Since the uptrend fails to sustain above the 50-day EMA, it is possible that a break below the trendline may occur. A bearish continuation would also provide an early indication that the ascending channel is breaking after failing to break out. You can see how each of the last two rallies tested the upper channel line, which acted as resistance.

For a look at all of today’s economic events, check out our economic calendar.