Natural Gas Price Forecast: Support Holds After Bearish Test

Failed Breakdown at Key Support Zone

Natural gas has had a chance to break below support and continue to weaken, but that has not happened. Instead, on Monday, it reached a slightly new trend low of $3.02 before buyers took back control, resulting in an intraday rally above Friday’s high of $3.14, and a recovery above the uptrend line, 20-day moving average, and 100-day moving average. A bullish outside day has resulted, suggesting that short-term trend support may continue to hold.

Weak Bearish Follow-Through

There have recently been bearish signs in natural gas but little confirming follow-through. Since a double top pattern reversal triggered below $3.10 three days ago, there has only been one daily close below that level. Notably, Friday’s session closed slightly above dynamic support represented by the 20-day moving average after trading below it for much of the session. Monday’s bullish outside day suggests that support may continue to hold and lead to further strengthening. A failed breakdown suggests a continuation, but that would change, of course, if there were a sustained decline below Monday’s low of $3.02.

Resistance Layers Above Recovery Zone

Although an advance above Monday’s high of $3.16 would show strength, key short-term dynamic resistance near the 10-day moving average at $3.18 represents resistance, since it was confirmed over four days last week. However, the lower swing high at $3.25 is key near-term structure resistance, and a recovery of that level would confirm a reclaim of the 10-day moving average.

Longer-Term Trend Structure Still Intact

Potentially more significant is the reclaim of the 100-day moving average at $3.12, given its long-term nature and the failure to break below it, at least so far. It should also be mentioned that the 20-week moving average has provided a dynamic support area near the lows of the prior couple of weeks, and it did so again on Monday. A successful test of support near that longer-term trend support zone follows a reclaim of that indicator three weeks ago. Once prior resistance shows up as an area of support, the rising trend may be ready to resume. Monday’s bullish price action is suggesting a similar outlook.