Natural Gas Price Forecast: Rally Tests Key 200-Day Resistance Zone

Strong Rally Pushes Price Toward Major Resistance

Natural gas spiked to a high of $3.58 on the Wednesday, exceeding a 38.2% Fibonacci retracement and approaching potentially significant resistance near the 200-day moving average. The 38.2% level was at $3.51, and the 200-day average is now at $3.64. A higher swing low at $3.60 from October is also nearby. At the time of writing, buyers remain in charge with trading continuing near the highs of the day and the session likely to end with natural gas in a similar bullish position.

Support Holds as Buyers Regain Control

The session began with a successful test of support at the 20-day average with a higher low for the day at $3.11. That was followed by a sharp advance to the day’s high. Notice that the area around the 20-average is where resistance was seen during Tuesday’s sharp advance. But rather than closing below the 20-day line, the session ended above it, showing strength and suggesting a possible breakout. That breakout triggered today with enthusiasm and resulted in a second consecutive wide range green candle, further showing buyers in charge.

200-Day Average Marks Critical Test Zone

Signs of resistance are anticipated near the 200-day average. Given the aggressive bullish reversal from a double bottom pattern earlier in the week, natural gas looks likely to further test a potential resistance zone near the October low of $3.60 and the 200-day average. Since the 200-day line is falling it becomes a more significance resistance zone once converged with the $3.60 area. For higher prices to be reached, the 200-day average needs to first be reclaimed with a daily close above the line. Since October’s pullback found support near the 200-day, resistance is expected on this first approach to the 200-day line following a breakdown in December.

Broadening Formation Signals Expanded Price Potential

Since the double bottom breakout triggered, a bullish reversal from the bottom of a broadening formation was generated. It shows the potential for the process of price discovery to expand the range rather than contract it. The December high of $5.02 was above the prior high of $4.95 from March and the recent low was below the prior low of $2.74 from August. This developing pattern suggests that natural gas could see more upside. But first it needs to deal with the 200-day average.

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