Natural Gas Price Forecast: Momentum Builds Toward Key Resistance

Natural Gas Retains Strength Near Key Moving Averages

Natural gas retained strength on Tuesday, as it confirmed support at the 200-day average and continues to test the 50-day average as both support and resistance. Strength of the advance was confirmed on Monday with a daily close above line. The 200-day average marks a key support level at $3.64. But given recent high volatility, it is at risk of failure short-term. As of the $4.00 from Monday, the price of natural gas was up by 55% from the $2.58 January low.

Fibonacci Levels and Price Structure Define Upside Targets

Certainly, the sharp rise from January lows is extended and due for a correction. But given signs of strong bullish momentum (sharp rise with little retracement), there remain a possibility of a bullish continuation. Higher targets start with a 61.8% Fibonacci retracement at $4.08, which is followed by a 78.6% Fibonacci retracement at 4.50. On the way up there is also price structure at $4.21 from a swing high in early-October.

Broadening Formation Provides Additional Bullish Potential

Since natural gas is tracing out a broadening formation, the top boundary line of the pattern is a potential upside target. The top line connects to the $5.02 peak in December. Strong bullish momentum following a double bottom breakout last week from the bottom of the formation suggests a recognition of the pattern. This helps keeps upside targets alive.

Support Levels and Pullback Risk to Watch

Meanwhile, further weakness is likely on a drop below Monday’s higher daily low of $3.65. That could lead to a test of support near price structure at $3.41. However, a test of support seems likely near the 10-day average, since it has been tested as support since reclaimed. Currently, at $3.24, the 10-day average crossed above the 20-day average recently, confirming strength. A break of the 10-day leads to a test of the 20-day average, at $3.11.

Short-Term Consolidation Could Fuel Further Upside

If natural gas does eventually progress closer to the top of the broadening formation, it would be healthier if there was a pullback or consolidation first given how stretched the short-term trend is. A successful test of the 10-day line as support could result in a solid setup for a continuation higher.

If you’d like to know more about how to trade natural gas, please visit our educational area.