Natural Gas Price Forecast: Bullish Reversal Signals Breakout

Technical Rebound and Breakout Conditions

Natural gas futures reached a four-day high of $3.08 on Friday, as a bullish reversal triggered, followed by a reclaim of resistance near the 10-day moving average. A daily close above Thursday’s high of $3.01 is needed to confirm a two-day breakout, while a closing price above $3.06 will confirm a three-day breakout. In addition, a reclaim of the 10-day average occurs on a closing above $3.04.

Support Holds, Bearish Correction May Be Complete

Support has been holding near the 78.6% Fibonacci retracement at $2.91, while a new low for the retracement was established at $2.87 on Wednesday. That low was also a successful test of support at the neckline of a small double bottom pattern formed in January. Reaching the 78.6% retracement suggests the bearish correction may be complete, while an upside trigger will show buyers taking back control. The 10-day average at $3.04 is the next key dynamic resistance level to reclaim if natural gas is to have a shot at higher prices. A daily close above the average will confirm an upside breakout.

Intermediate Resistance Levels and Upside Targets

But the interim lower swing high at $3.19 is a key part of the structure for the decline and a rise above it will trigger a bullish reversal. Initial upside targets will start at the next lower swing high at $3.45. It is joined by a horizontal line showing it as both support and resistance last year, and then resistance for the $3.45 swing high. The 200-day moving average at $3.62 presents another possible resistance area. Notice that even though there has not been a trending environment for natural gas recently, the 200-day was still recognized by the market several times.

Broadening Formation and Long-Term Potential

Since natural gas has been tracing out a large broadening formation, a sustained bullish reversal from current lows would open the possibility of eventually reaching the top boundary line of the formation. Regardless, upside pressure could assist a rally towards the highs, even if they are not reached. So, this means the lower swing high at $4.09 could be surpassed on the way to a 78.6% Fibonacci retracement at $4.50.

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