Natural Gas Price Forecast: Bullish Continuation Stalls at Resistance Zone

Natural gas advanced on Monday, reaching a high of 2.26, at the time of this writing. It was the third day in a row that it rallied. Each of the prior two days ended strong, in the top quarter of the day’s range. Earlier, it looked like today’s session may also end strong, but the situation has weakened somewhat intraday.

Upward momentum has been strong as the two previously identified resistance targets at 2.20 (rising ABCD pattern, 127.2% extended target (D)) and 2.24 (38.2% Fibonacci retracement and swing low support from December 13) were exceeded to the upside. An intraday pullback followed the 2.62 high, with lower price levels being tested as support.

Next Bullish Signal, Above Monday Highs

Following today’s close, a bull trend continuation signal will be generated on a rally above today’s high and confirmed on a daily close above it. However, given that the ascent has stalled within a target zone, the potential for a pullback prior to a continuation higher has increased. This would be healthy for the advance and provide better risk reward opportunities for the next rally.

Pullback May be Short Lived

Last week’s pullback was shallow, indicating underlying strength in demand. A somewhat similar short-term pullback may occur off today’s high. Significant potential support is noted at last week’s low of 1.91 and it marks the maximum decline anticipated for the near-term bullish outlook to be maintained. But support should be seen higher. Watch the 2.17 price zone (resistance and now potential support from February 1 high) and today’s low of 2.13.

Measured Move Points to 2.40 Possibly

The current upswing in natural gas has exceeded the three previous rallies of 22.3%, 32%, and 24.8%, reflecting improving demand. As of today’s high, it was up by 42.9% from the most recent swing low at 1.58 (C). The relative performance confirms that the buyers are back in charge. Analysis of time provides additional supporting evidence for the bull move as the current advance was faster than the prior three.

This is another way to confirm strength as the current advance is only on its seventh day and the three prior rallies completed in three to 11 days. So, based on time there could be further upside. Also, taking a measured move of the fourth most recent rally, that began from the December 13 swing low, further supports a bullish scenario. That rally was 51.8% in 20 trading days. Similar performance in the current move would occur around a 2.40 target zone.

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