Natural Gas Price Forecast: Rally Stalls at Major Resistance

Price Rejected at 200-Day Average

Natural gas extended its advance on Thursday to a high of $3.71, before encountering resistance near the 200-day moving average. Selling pressure followed, driving price to the lower half of the day’s range and below the 200-day line at $3.64, at writing. This presents a likely bearish one-day candle near key long-term resistance. If short-term support at the day’s low of $3.45 fails, a deeper pullback is likely. A first test of prior trend support as resistance is frequently met with initial resistance. What follows will be revealing on the chances of an eventual upside breakout of the 200-day average.

20-Day Average Becomes Key Support

Since the 20-day average was recently reclaimed and then tested as support with Wednesday’s low of $3.11, it becomes a key price area to watch for signs of improving demand during weakness. The 20-day line is now at $3.13. Regardless, a pullback or consolidation would be healthy for the counter-trend rally if it is to take a shot at succeeding in reclaiming the 200-day line. In October the 200-day average identified support in a similar area that shows resistance now. That price level is $3.60, and it can be watched for clues along with the average. Notice that the price of natural gas is currently below that level heading into the end of the session, further identifying the area of resistance along with Wednesday’s high.

Weekly Resistance Reinforces Pullback

It is also interesting to note that on the weekly chart the 50-week average marks potential resistance at $3.73 currently. That provides added credibility to the backoff from the new high today. Nonetheless, the confirmed reclaim of the 20-day average and powerful rally suggests that following a correction of some degree, natural gas may make another run at rising above the 200-day line. The relationship to the 20-day average shows strength that should have more to it. It had held as trend resistance since early-December when it fell below the line.

Broader Structure Remains Constructive

Another key potential support area is the 10-day average at $2.95 and the neckline of a double bottom pattern at $2.90. The bullish response following a drop to a new swing low earlier this month establishes a potential broadening formation, with potential targets near recent highs. Whether the target is eventually reached or not, demand may remain strong. Natural gas has had one leg up off the January bottom and it could have a second following a correction.

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