Natural Gas Price Forecast: Breakout Signals Potential Trend Reversal

Breakout Above Resistance Signals Improving Momentum

Natural gas advanced above Wednesday’s high on Thursday, triggering a breakout. The bull breakout confirms on a daily close above $3.90. Once confirmed, higher prices are likely. Support on Wednesday at $3.58 was seen at the 200-day average and followed a down gap due to futures contract rollover. Thursday’s low of $3.73 established a higher daily low, which shows improving demand and near-term support. Nonetheless, key support is at $3.58, supported by the nearby 200-day average. As long as that level holds as support, the price of natural gas has an upward bias.

200-Day Average Provides Key Technical Support

It is interesting to note that the low for this week was found not only at the 200-day average, but also at the October swing high resistance level of $3.59. Once prior resistance is shown as support followed by strength, the area gains significance. This means that natural gas may have found a bottom. Improving bullish sentiment will be seen on a rise above the day’s high of $3.93 and confirmed on a daily close above it.

Prior Resistance Turns Into Support Zone

With a good chance of a bottom, pullback will likely be used by investors to accumulate. Even if the market moves range-bound, the likely result is higher prices, and downside risk is defined below this week’s low of $3.58. Note that the selloff earlier in January found support near the convergence of two trendlines, one rising and the other falling. It happened that price reached the lines very close to the time they crossed. Now, the 200-day line is being respected to the point where a similar sharp bull rally could result.

Weekly Structure Supports Upside Bias

On the weekly chart, support is shown near the 50-week average of $3.66, giving added credibility to the price area. Volatility in natural gas picked up after a trendline breakout in October. The subsequent volatility may decline over time, but for now, it can be expected to continue, but may be to a lesser degree. Since the August bottom, there have been two legs up in the price of natural gas. It is now positioned to begin a potential third leg up if this week’s support is retained.