Natural gas broke below the neckline support of its head and shoulders pattern, indicating that a reversal from the uptrend is in the works.

Price could fall by the same height as the chart formation, which spans around $1.00. With that, natural gas might tumble to $4.00 or lower from here.

However, technical indicators are suggesting that the climb might still resume. The 100 SMA is above the 200 SMA to show that the path of least resistance is to the upside, although price has already broken below both dynamic inflection points.

Stochastic is indicating oversold conditions or exhaustion among sellers, so turning higher would mean that buyers are returning. RSI has a bit more room to move south, but the oscillator is also inching close to the oversold area.

A return in bullish pressure might simply mean a pullback to the broken neckline support where more sellers are waiting.

Natural gas is under some downside pressure since demand in the US is likely to slow in the coming months. Keep in mind that purchases of cooling commodities takes a hit around this time of the year, as temperatures start to drop.

Still, longer-term upside factors remain since supply is still limited while demand could pick up much later in the year. Analysts are still projecting one of the most expensive winter seasons in terms of heating commodities.

Also, demand in other parts of the globe remains elevated, with coal production at a standstill in China due to the floods. Europe is also seeing a pickup in demand for natural gas while struggling with weaker supply conditions.

The upcoming inventory report from the Department of Energy might have more insights on supply and demand conditions, as a small build or a surprise draw might allow the natural gas rally to resume.