Natural Gas Price Forecast: Bull Trend Retained as Highs in Sight

Short-Term Reversal Sparks Momentum Shift

Natural gas advanced to a seven-day high of $3.26 on Tuesday, triggering a bullish reversal above the lower swing high of $3.25 from last Wednesday. A higher daily low of $3.13 was established near the confluence of support from the uptrend line and the 20-day moving average. In addition, short-term strength was confirmed by a reclaim of the 10-day moving average, which was successfully tested as resistance over four days last week.

Tuesday’s bullish price action also confirmed a reclaim of the 100-day moving average, which had been tested as resistance on multiple days since the start of last week. A daily close above $3.25 is needed to confirm the breakout.

Trend Structure Holds

Nonetheless, natural gas is showing signs that the current uptrend is being retained. A short downtrend line marks the next target zone, which is near $3.32 at present. However, since the line is declining it will represent a lower price starting next session. A break above that line puts a resistance zone near trend highs from approximately $3.36 to $3.40. However, given the signs that the uptrend may progress, those levels could be reclaimed on the way toward the next upside targets.

Long-Term Targets and Pattern Extension Zone

In particular, the 200-day moving average was successfully tested as resistance with the $3.40 trend high. Therefore, it presents another upside target and is currently near $3.43. Also, there was a lower swing high at $3.49 from early March and it provides another higher target zone, not only because it is a lower swing high, but also since it was the beginning of a falling bullish wedge that initiated the current uptrend.

Typically, an initial target derived from that pattern is the beginning of the formation. Although this higher target may not be reached, its existence supports the potential for the 200-day moving average to again be tested as support at the higher price point.

Broken Trendline Retest Frames Larger Context

Underlying recent price action is the first pullback to test prior key dynamic support as resistance following a significant breakdown. In February, the long-term uptrend line was broken, leading to a continuation of the bearish trend and a low of $2.50 in April. The current advance is the first notable pullback towards the uptrend line to test it as resistance. The relationship to the 200-day average is similar, although it broke in early February, a little before the trendline. Once that process is complete, the larger bearish implications of the trendline break may reassert themselves.