Natural Gas Price Forecast: Bull Pennant Faces Critical Retest

Post-Breakout Reversal Pressure Emerges

Natural gas weakened on Thursday, as it further tested support near the top of a bull pennant formation, reaching a low for the session of $3.12. An upside breakout of the pennant triggered on Monday, resulting in a high of $3.31 before sellers took back control and triggered a one-day bearish reversal and a bearish engulfing candlestick pattern. That high completed a successful test of resistance near the 78.6% Fibonacci retracement of the prior decline, also at $3.31. This sequence reflects a typical post-breakout retest behavior within continuation patterns, where initial momentum is reassessed by the market.

Converging Support Defines Breakout Validity

This is the first pullback following the pennant bullish continuation breakout and is anticipated to find support followed by renewed demand, unless there are additional signals of weakening. The bullish implications of the pattern remain valid unless there is a decline below the lower boundary line. Today, that line is also marked by the convergence of the 100-day and 50-day moving averages, as the shorter average is starting to cross above the longer. They are now around $3.05. But since the lower boundary line is rising, that boundary will represent a higher price going forward, increasing the importance of each subsequent retest of support.

Upside Objective Still Intact Despite Pullback

Although a Fibonacci retracement target was reached following the breakout, the pattern’s minimum objective has not been reached. This suggests that another leg up may follow a short pullback. An upper target zone is potentially near the long-term uptrend line, which previously marked trend support. The current upswing will test it as resistance; the question is how close price may get to the line. Also, the potentially significant 200-day moving average shows possible resistance around $3.43. It is close to the beginning of the falling wedge at $3.49, that triggered three weeks ago.

Weekly Close Risk Signals Pattern Resolution

Of concern is the potential for a bearish shooting star candlestick pattern to end the week. It is present on Thursday, but if strength returns before Friday’s close, the pattern may change character.

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