Natural Gas Price Forecast: Is Another Breakout Attempt Coming?

Intraday Breakout Rejected at Key Technical Cluster

Natural gas attempted to break out above a minor trendline on Monday, reaching a 10-day high of $3.38, before sellers took back control intraday. The breakout looks set to have failed to confirm with a close above the trendline. Resistance for the advance was seen near recent highs that ranged from around $3.41 to the recent trend high of $3.42. Also, Monday’s high was almost an exact test of resistance at the 100-day moving average and a little shy of the 88.6% Fibonacci retracement of the prior decline at $3.39.

Range Structure Between Major Moving Averages

This leaves natural gas essentially trading within a range, with the 200-day moving average and 50-week moving average, near $3.45 and $3.42, respectively, marking a resistance zone. The 50-day moving average near $3.06 and the 20-week moving average, also around $3.06, define a key support zone. Given the bullish behavior on Monday, which included the breakout of a two-day range and the short downtrend line, the short-term bullish trend structure of higher swing lows and higher swing highs may still reassert itself.

Broader Pattern Signals Ongoing Consolidation

Nonetheless, the broader advancing pattern from the April lows shows an ascending broadening formation. This suggests that, despite the underlying trend structure, consolidation could continue for a while longer as the formation continues to develop.

Upside Extension or Rejection Scenario

On the upside, it looks possible to have a quick overshoot of the 200-day moving average to test resistance near the lower swing high of $3.49 from early March. That is also the beginning of a falling wedge formation that triggered to the upside in late April. Although the current expectation is for natural gas to eventually confirm resistance and turn back down to test the lows from April. If there is a daily close above the 200-day moving average or above the April swing high, then that outlook may start to change. A recovery of the March high would signal a broader trend reversal.

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