Natural Gas Price Forecast: Bullish Breakout Faces Key Test

Pullback Follows Test of Key Resistance

Natural gas pulled back to test support near the 20-day moving average on Wednesday for the first time since it was reclaimed last week. Resistance was seen from a high of $2.88 on Monday, which has resulted in a lower swing high. It was a successful test of resistance at the 50-day moving average and it led to a pullback to a low of $2.69 during Wednesday’s session.

20-Day Support Holds, 50-Day Remains Barrier

The 50-day average remains the key dynamic indicator to reclaim for further signs of strength. It has represented trend resistance since a break below the average occurred in late-January. Continued signs of support at or above the 20-day moving average will keep that possibility alive. Natural gas broke out of a falling bullish wedge recently, and this suggests that improving bullish momentum may follow that breakout. That could be strong enough to reclaim the 50-day moving average.

Upside Targets Expand on Break Above Resistance

A decisive reclaim of the 50-day moving average would put higher targets in sight. At the top of a potential target range is the beginning of the wedge formation at $3.49. But a little lower is the long-term 200-day moving average, which is now at $3.41 and falling. The 78.6% retracement of the prior decline is another more likely target to be reached at $3.82.

Larger Downtrend Context Still in Play

Although a larger downtrend structure is forming, a pullback towards the long-term uptrend line and 200-day moving average to test them as resistance would be normal price behavior after a significant breakdown. In February, the uptrend line failed as support, which led to the April low near $2.50. A swing back to test prior support as resistance after a long-term breakdown, would be normal and healthy price behavior. This is why the upside targets following the wedge breakout, remain possible.

Key Support Levels Define Bullish Scenario

The bullish scenario is retained unless the recent minor interim swing low at $2.59 is key support based on structure. Of course, the recent low of $2.50 is another key price level.

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