Natural Gas Price Forecast: Bullish Signs at Channel Support

Bullish Outside Day at Trendline Support

Minor signs of strength continue to be seen in the price of natural gas. For the fourth day on Thursday, it held above a support zone near the long-term uptrend line. The low from Wednesday at $3.06 established a new low for the corrective bear trend before buyers took control and pushed the price of natural gas higher, resulting in a bullish outside day. Strength was confirmed by a close above Tuesday’s high of $3.21.

Reversal Requires Break Above $3.66

Just based on the extent of the bearish correction, natural gas is overdue for a rally. However, any advance would be occurring inside a dominant downtrend that includes a lower swing high at $3.66. A breakout above the high will be needed to trigger a reversal of the downtrend. Once a daily close above that level confirms bullish price action, the advance should be ready to head towards higher targets.

Channel Midline and Fibonacci Targets

The first target is near the middle line of a rising trend channel. It has potential significance as a resistance area since it was recognized by the market several times during the channel formation – as either dynamic support or resistance. When looking at the long-term rising channel price swings have stopped and reversed near the upper and lower boundaries of the formation. Since natural gas is at the bottom of the channel currently, the more likely next swing is to the upside. But there is also the target from the 38.2% Fibonacci retracement of the decline from $7.44, at $4.73. It is currently nearby the middle of the channel.

Undercut Scenario Could Strengthen Rebound

One scenario to be cautious of is a quick undercut of the $3.02 higher swing low from January, followed a decisive recovery of that level, confirmed by a daily close above. It is a stronger bullish signal if the close above the prior trend low occurs on the same day, but it can happen a day or a few later as well. Either way, the chance for a bounce from near the lows of the channel, is increasing.

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