Natural Gas Price Forecast: Resistance Confluence Limits Upside

Short-Term Resistance Test Holds Firm

Another test of resistance near the 20-day moving average occurred on Wednesday, as natural gas advanced to a 10-day high of $2.91 before encountering resistance. An intraday pullback to below the midpoint of the day’s range followed, confirming resistance near the 20-day average. However, the 10-day moving average was confirmed as support, as the entire session range remained above it for the first time since March 30.

Bounce Potential into Converging Resistance Zone

Wednesday’s price action showed minor signs of strength that could lead to a higher bounce towards the next key trend resistance indicators, which include the downtrend line and 50-day moving average. That average is now at $2.97 and is nearing convergence with the trendline. A higher bounce would be occurring within a larger declining trend, however, and that trend is anticipated to continue once resistance is tested, unless there is a decisive breakout above the 50-day moving average, followed by a bullish reversal signal above the recent lower swing high of $3.00.

Key Reversal Thresholds and Upside Extension Levels

A sustained recovery of the $3.00 high would be needed before there are signs that buyers may retain control. If that occurs, then the more significant lower swing high at $3.19 becomes a potential upside target zone. The 100-day moving average is another important trend indicator that is declining toward that swing high, reinforcing it as a potentially strong resistance zone as well.

Volatility Compression Precedes Directional Move

Volatility in natural gas has been compressing overall, as represented by two trendlines that are set to converge around May 13. Momentum should improve once one of those lines is broken. The stronger force remains bearish since a long-term uptrend line was broken in early January and then again in February. But this doesn’t preclude another upswing to test resistance before sellers reassert the bearish trend.

Such a scenario would align with the recent consolidation near the 20-day moving average discussed earlier, reinforcing the likelihood of a temporary bounce before continuation lower. That would occur on a breakdown below the recent higher swing low at $2.72, which would signal renewed downside pressure. Natural gas would then likely head towards the swing low from January at $2.58.

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