Natural Gas Price Forecast: Counter-Trend Strength Builds Above Support

Natural Gas Reclaims Key Moving Averages

Natural gas spiked to a new counter-trend high of $4.00 on Monday, as it recovered both the 200-day and 50-day moving averages and almost completed a 61.8% Fibonacci of the prior decline. At time of writing, prior resistance near the 50-day average is showing signs of support during an intraday pullback. A stronger close will be indicated above the 50-day line, currently at $3.82, rather than below it. Strength in the counter-trend advance was confirmed not only by the reclaim of two moving averages. Monday’s low of $3.65 was right at the 200-day average, thereby confirming it as support on a short-term basis.

200-Day Average Defines Critical Support Zone

Key support is near the 200-day average with an upward bias maintained if the price of natural gas remains above that line. The 50-day can help with short-term clues, but a retention of 200-day average support is needed if natural gas is to have a chance at continuing towards the top of a broadening formation. The establishment of the lower boundary of the pattern followed the January low of $2.58 and a upside double bottom breakout above $2.90.

Fibonacci Targets Outline Upside Potential

If the rally can extend above today’s high, then the 61.8% Fibonacci retracement at $4.09 marks the next target, along with structure resistance around $4.21. Further up is the 78.6% Fibonacci retracement at $4.50. Given the sharp bullish momentum seen from the January bottom, the buyers could remain in charge up to the higher Fibonacci level. Certainly, following a pullback and bounce from support, the higher level becomes a good target. That is, if support at the 200-day average or above holds.

Failure Below Support Shifts Focus Lower

A decisive drop below the 200-day average makes the 20-day average a lower target. Currently at $3.11, the 20-day line was recognized on the way up as support. Notice that the 10-day average is currently crossing above the 50-day. That along with the recovery of other key moving averages today, show strong underlying demand remaining in the counter-trend rally. However, that could easily start to dissipate with a failure of support at the 200-day line.

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