Natural Gas Price Forecast: Rally Reaches $3.54 Resistance Zone

For the fourth day in a row, on Tuesday natural gas established a higher daily high and higher low, as it reached a new high of $3.54 for the counter-trend bounce. It looks likely to end the day at an eight-day closing high, and possibly a nine-day high, if it ends above $3.50. A breakout above the 200-Day MA was confirmed on Monday with a daily close above the line. Today will be the second confirmation of the breakout. At the time of this writing, natural gas continues to trade in the upper third of the day’s trading range and looks likely to close the session in a similar bullish position.

Continues to Show Strength

Natural gas completed a 78.6% Fibonacci retracement last week, which was followed by a bullish reversal and rise into today’s high. Last week’s low at $3.15 certainly could be the end of the bearish correction. Although a lower trend support line was broken briefly, the line was quickly recovered and demand improved. Nonetheless, natural gas remains vulnerable to downward pressure until it sustained an advance above $3.57. That is the most recent lower swing high on the daily time frame, and a rise above will trigger a reversal of the very short-term downtrend structure beginning from the June 27 lower swing high at $3.75.

Weekly Bull Breakout

The bulls have the weekly pattern on their side as a one-week bullish reversal triggered yesterday. But it was not confirmed by a daily close above last week’s high of $3.47. However, that looks likely to happen today, and it will provide another piece of evidence supportive of an eventual continuation to the upside. A potentially solid resistance zone from $3.53 to $3.54 was approached today. It includes an AVWAP level from the April swing low and two moving averages, the 20-Day MA and 50-Day MA. They have converged to identify the same price level at $3.54.

Reached Key Decision Point

The behavior of natural gas around this potentially significant resistance zone should provide clues about supply and demand. For example, a daily close above the 20-Day MA shows buyers retaining control. That would increase the chance for a sustainable breakout above $3.57. A daily close above that level will then put the $3.75 lower swing high at risk of being busted, which would trigger a new bullish reversal. Either way, weakness will be watched by traders for a potential upside continuation.

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