Natural Gas Price Forecast: Struggles at Resistance After 31% Rally

Natural gas retested a resistance zone on Thursday, establishing a high of $3.72. That was a direct touch with the 61.8% Fibonacci retracement of the most recent downswing. Subsequently, sellers took back control and drove the price down and negative for the day. Trading continues near the lows of the day at the time of this writing, and it looks likely that the day will end with the price of natural gas in a similar weak position. Currently, the low for the day was $3.53.

Resistance Zone Retained

Before the bull trend can go higher it first needs to break out from the resistance zone that stopped the ascent on Monday and then again today. Resistance was seen at the $3.75 high on Monday, which led to a short one-day pullback that found support around the 38.2% Fibonacci retracement. Strength returned quickly with positive gains on Wednesday and a continuation higher today. The bearish response following another test of the resistance zone earlier in today’s session further confirms the resistance zone. What happens next should provide clues.

Drop Below $3.53 May Lead Lower

A decline below today’s low of $3.53 is short-term bearish and increases the chance for a test of this week’s low at $3.42 and possibly dropping below that level. The key 20-Day MA is now at $3.31. If a deeper pullback comes, that line is likely to be tested. If support is seen at or above the 20-Day line, natural gas has a chance of continuing higher.

Given the significance of the resistance zone a deeper pullback before another breakout attempt would be healthy for the rally. Nonetheless, an earlier breakout to new trend highs would be bullish. But the upside may be limited as during the advance the price of natural gas rose by $0.90 or 31.1% as of Monday’s high.

Keep Eye on 50-Day Moving Average Resistance

The 50-Day MA, now at $3.75, has been falling and has converged with the high from Monday. There is the neckline of a head and should topping pattern at $3.74 and the AVWAP from the top of the trend is at $3.73. An upside trend breakout would be signaled on a rise above $3.75, the top of the resistance zone. Until then, natural gas can be anticipated to consolidate or continue the bearish pullback.

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