Natural Gas Price Forecast: Stabilizes Near Key Long-Term Support Zone

Natural gas further stabilized around a potential support zone on Friday, which could lead to a bottom and a higher swing low. A breakout triggered above Thursday’s high and natural gas remains on track to end the session with a higher daily high and higher low.

Currently, the low and high for the day are $3.05 and $3.13, respectively, which is a relatively narrow range day. Although there was little progress with the one-day breakout, it was not a convincing sign that demand is improving given the narrow range.

Holding Above Potentially Significant Support

Nevertheless, natural gas reached a potentially significant support zone this week, with a new low for the correction established at $2.97. There are several reasons why that low may be significant and therefore lead to a sustainable bullish reversal and a counter-trend rally. The more significant is the convergence of a long-term uptrend line and long-term anchored volume weighted average price (AVWAP) line converged around the trend bottom.

Price was then clearly rejected to the upside from that zone yesterday. In addition, there is a horizontal level around $3.02 (dotted) that coincides with the same prize zone and identified by the market more than a few times the past couple of years.

Strong Bounce Recovers Prior Low

What followed the bounce from the trendline was an immediate recovery of the prior low at $2.98 and a strong close near the highs of the day. This is short-term bullish behavior that requires further confirmation of strength if the price of natural gas is to progress higher.

Pattern Expansion Looks Likely

If this week’s low is retained as a low, then a higher swing low is generated, and a $1.18 (or 28.35%) bearish correction is likely completed. A sustained rally from a lower trend channel line opens the door to a continuation of the larger bull trend as natural gas has the potential to eventually test resistance near the top of the channel.

Lower potential upside targets then become more likely to be reached whether the top of the channel eventually is or not. If the buyers are to take control, the time to do it is on a rally from this week’s lows. At the same time, a decisive decline through $2.97 increases the risk of a deeper pullback before the correction completes.

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