Natural Gas Price Forecast: Breakout Extends Bullish Trend

Bullish Pennant Breakout Ignites Momentum

Natural gas broke up and out of a small bullish pennant consolidation pattern on Monday, leading to a new short-term trend high of $3.23. The advance also signalled a trend reversal on a rally above the lower swing high of $3.19 from late March. That was part of the prior bearish trend structure. A daily close above the prior high of $3.18 will confirm that breakout and trend extension, plus a recovery of the 61.8% Fibonacci retracement of the prior decline at $3.17.

Trend Reversal Confirmation in Motion

Monday’s breakout signals a continuation of the advance that began from the April swing low of $2.65. An upside breakout of a falling bullish wedge subsequently triggered, along with a reclaim of key moving averages, especially the 50-day moving average. It was successfully tested as support during the formation of the pennant triangle. Bullish momentum is also confirmed by the 20-day moving average starting to cross above the 50-day moving average. Short-term bullish momentum is improving and that should now continue given the new breakout signal.

Weekly Structure Turns Supportive

The bullish indications of Monday’s advance are also present in the weekly chart. An inside week breakout triggered on Monday, which further confirmed a reclaim of the 20-week moving average. That average has represented dynamic resistance since it was broken in early February.

Upside Targets Stretch Toward Key Resistance Zones

An upside breakout of the wedge indicates a potential upside target around $3.48, which is its beginning and a lower swing high. But the long-term 200-day moving average is due to be tested as a resistance zone, given the failure of support at the long-term uptrend line in January. It is now at $$3.43 and has started to stabilize by starting to go sideways. The uptrend also represents key potential resistance as well, but the 200-day moving average would need to be reclaimed first.

That leads the 200-day zone at risk of being broken to the upside. There is also the 61.8% Fibonacci retracement of a prior decline at $3.52, providing another upside target zone if the buyers can retain control. Monday’s bullish price action suggests that they will.