Natural Gas Breaks Out of Bullish Wedge
Natural gas triggered a breakout of a bullish falling wedge on Wednesday, climbing to a seven-day high of $2.91. The advance tested the 20-Day moving average at $2.90, marking the first challenge of this line since July 21. Trading has held below this moving average for more than a month, making it a significant near-term barrier to higher prices.
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See all Natural Gas forecastsThe first approach today did not clear it, but since the breakout is occurring on the first day of a bullish reversal, demand could build to eventually reclaim the level. Encouragingly, price remains in the upper half of the day’s range, reflecting underlying strength.
Key Resistance Tests Ahead
In addition to the 20-Day moving average, natural gas faces resistance at last week’s high of $2.92. A close above that level would trigger a one-week bullish reversal signal. If successful, the next obstacle lies at $2.97, an interim swing high that coincides with resistance identified by an anchored volume weighted average price (AVWAP). This AVWAP level was previously support until early August, suggesting a strong reaction could emerge on the first test as resistance.
Upside Targets and Moving Averages
The bullish wedge pattern projects upside targets at $3.15 and $3.19, depending on how the beginning of the wedge is measured. However, before those objectives can be reached, natural gas must push through lower resistance levels. The 50-Day moving average, now at $3.21 and trending lower, presents another hurdle. Since it failed as support in early-July, a first retest as resistance may prove difficult to overcome. Its potential convergence with a long-term uptrend line increases the significance of this potential barrier if price advances that far.
Shift in Momentum
The falling wedge represented a tight consolidation with waning bearish momentum. Sellers were unable to drive a deeper decline, and buyers ultimately gained control. While Wednesday’s breakout is only the first sign of a potential trend shift, it sets the stage for further upside attempts. Follow-through strength above $2.92 and $2.97 will be essential to confirm the breakout and establish a stronger bullish tone.
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