Natural Gas Price Forecast: Key Levels Define Next Moves

Recent Price Action and Short-Term Risk

A bullish reversal was attempted in natural gas on Monday, triggering a breakout to a six-day high of $3.15, before sellers took back control. Following the day’s high, sellers took control, driving price to a new low for the day at $2.92 and a test of support near the lows of the prior four days. The low for the bearish correction is at $2.87. Trading continues near the lows of the day as this is written, and it is at risk of breaking lower if sellers maintain downward pressure.

There was also a reclaim of the 10-day average at $3.01 early in Monday’s session, which was bullish. However, a daily close below that average will reflect a failed bullish breakout above the indicator. Note that Monday was the first decisive breakout above the 10-day average since it failed as support on February 2.

Support Zones and Fibonacci Levels

For the past week or so natural gas has been successfully testing support near the 78.6% Fibonacci retracement at $2.90. Although Monday’s failed bull breakout has led to strong selling pressure, until the current retracement low at $2.87 fails, it may continue to act as support, leading to another upside reversal. Below $2.87 is an 88.6% retracement level for support at $2.75.

Volatility and Key Technical Levels

Short-term spikes in volatility in natural gas have been relatively common since late-September. Monday’s event was relatively small since it lasted a single day. Regardless, it alludes to additional risk of sharp moves in either direction. This makes it more important to identify and key off major price levels. The $2.87 low is one such price zone. On the upside, an interim lower swing high at $3.19 is key. That is because it is part of the structure of the downtrend from the $4.09 January high, of lower swing highs and lower swing lows.

Broadening Formation and Upside Targets

Natural gas shows a large, broadening formation that has formed on its chart. Recent price swings formed the pattern of consolidation with an expanding range. Once a reversal from one side of the range triggers, the other side becomes an eventual target. This doesn’t mean that the opposite boundary line will be reached, but it does suggest that an attempt will be made to do so. Therefore, a decisive recovery of the $3.19 swing high puts natural gas in a position to attempt to reach higher targets. Above $3.19 and natural gas heads towards another lower swing high at $3.45 and then the 200-day average at $3.61.

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