Natural Gas Price Forecast: Breakout Could Decide Next Major Move

Converging Resistance Limits Advance

Natural gas continued its short-term advance on Wednesday, following a third test of support that occurred on Monday with a low of $2.69. That low is the third swing low that has been established during a four-week consolidation range formed near the lows of the current decline and below key dynamic support represented by an uptrend line. Wednesday’s high of $2.88 was another test of resistance near an uptrend line that was successfully tested twice before during the consolidation phase. The session’s high also encountered resistance at the downtrend line, creating a significant convergence of resistance.

Natural gas futures daily chart shows test of key resistance. Source: TradingView

Following the high, sellers regained control and pushed prices down and back to the lower third of the day’s range. At the time of writing, Wednesday’s higher daily low of $2.80 provides a short-term support level. As noted previously, until natural gas moves out of the price range, a choppy trading environment can be expected. The continued back-and-forth price action highlights the importance of the range boundaries, particularly as resistance continues to limit advances.

Natural gas futures daily chart shows larger trend structure. Source: TradingView.

Range Holds Key Directional Signals

The significance of Wednesday’s high is increased since the two trendlines have converged at the same time as they were tested as resistance. Since natural gas is in a clear downtrend and prices were rejected from this convergence zone, sellers remain in control. Nonetheless, the consolidation pattern could lead to a continuation of the bearish trend, with a decline below the bottom of the range at $2.67, while a bullish reversal signal would be triggered by a move above the top of the current range at $2.89. Keep in mind that the larger downtrend structure would remain in place until the 50-day moving average was reclaimed.

Upside Targets Remain Overhead

Further signs of strength would then be needed to show sustained bullish momentum. However, an initial upside target looks to be around the 50-day moving average, now near $2.97, and a lower swing high near $2.98. That price area confirmed a switch from support to resistance during the recent decline, which strengthens its significance as a resistance zone. Also, an advance above $2.89 will provide a bullish reversal signal for the short-term downtrend. Until that breakout occurs, Wednesday’s rejection from the converging trendlines reinforces the current bearish bias and keeps the consolidation range in focus.