Natural Gas Price Forecast: Breakout Points Toward $3.20

Reversal Puts Support to Work

Natural gas extended gains to a new high of $3.03 on Thursday before resistance emerged and sellers regained control. A decline below Wednesday’s low followed, reaching $2.89, which was a successful test of support near the 50-day moving average after it was reclaimed earlier this week. That resulted in a bearish outside day that closed on potential support at the 50-day moving average. A decisive decline below Thursday’s low would increase near-term downside risk since support at the 20-day moving average would have failed.

Bullish Structure Remains Intact

That could lead to another test of support near last Friday’s low of $2.84. Meanwhile, the rising 20-day moving average near $2.81 offers lower dynamic support and will soon rise above Friday’s low. Nonetheless, the developing near-term outlook for natural gas is bullish. A trend reversal signal from a bottom consolidation pattern triggered last week, and both the 50-day and 100-day moving averages were reclaimed this week.

Next Break Could Open Higher Targets

Strength was subsequently confirmed by a daily close above the recent lower swing high of $2.99 on Wednesday, although Thursday’s close at $3.00 was not much higher. The move nonetheless technically confirmed the breakout, suggesting that another attempt at higher prices could have greater success. If natural gas can stay above the 50-day moving average and eventually advance above $3.03, it has a chance to complete a 61.8% Fibonacci retracement of the prior decline at $3.07 and possibly reach higher levels.

The 78.6% Fibonacci retracement at $3.20 provides a higher potential target, along with the 200-day moving average at $3.29. The 200-day average was tested as resistance successfully during the prior advance and could be tested again. Therefore, it presents a more significant potential resistance zone and will gain technical credibility the closer it gets to the 78.6% retracement zone.

Given the recently established higher swing low, which shows underlying strength, an eventual extension of the current advance to the 200-day moving average would reinforce the developing bullish reversal and remain consistent with the pattern now taking shape.

If you’d like to know more about how to trade natural gas, please visit our educational area.