Natural Gas Price Forecast: Faces Healthy Pullback

Natural gas triggered a deeper pullback today following a breakdown of an inside day. It was followed by a three-day low of 2.90. Support was seen off that low leading to an intraday bounce. Today’s low tested support around the prior trend high of 2.92, which was followed by a rejection the upside. This is a normal and healthy minor pullback following a clear bullish breakout last week. Natural gas broke out above both the long-term downtrend and bull pennant trend continuation pattern last week.

Uptrend Line Shows Dynamic Support

An uptrend line marks dynamic support for the current advance that began from the April 25 swing low. Also, the downtrend line identifies a price area for potential support. If the uptrend line is broken the downtrend line is the next line to watch for possible support. The two lines cross at a price of 2.84, marking another price to watch. That price area can be watched along with this week’s low of 2.86.

A little lower is the important 20-Day MA at 2.75. Notice that the 20-Day line has now converged with the top boundary line of the pennant pattern. Each is marking a similar price support area. It is also interesting that the day the 20-Day MA hit the bottom boundary line of the pennant on June 6, was the day of the pennant breakout. Although it closed weak, the next day’s upside continuation made up for it.

Trend Anticipated to Resume Following Minor Retracement

Given the strong bullish behavior of natural gas during the current ascent, higher targets remain in sight. At the same time, the relative strength index momentum oscillator (RSI) is beginning to show signs of a bearish divergence. It is still early though but should be watched as the trend progresses.

Breakout Above 3.09 Shows Strength

Given today’s pullback, a rally above the day’s high of 3.09 provides a sign of strength. The next higher target zone, above the nearby 3.18 to 3.20 Fibonacci confluence zone, is the 3.39 swing high from early-January. Nevertheless, a decisive breakout above this week’s high of 3.16 has a good chance of exceeding that swing high eventually, if not on the first approach.

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