Natural Gas Price Forecast: Surge Clears Key Technical Barriers

Natural gas continued to show strength in the face of potential resistance on Wednesday, as it advanced for the fifth day of higher highs and higher lows. The convergence of several trend indicators marked potentially significant resistance, anchored by the 20-Day MA at $3.53. That price zone stopped the rally on Tuesday, as the day’s high hit the 20-Day MA and then pulled back. However, a decisive upside breakout triggered earlier today and subsequently led to another breakout, this time above an interim swing high of the prior decline at $4.57.

Bulls Remain in Charge

The bulls remain in charge at the time of this writing, with trading continuing in the upper half of the day’s trading range. A daily close above yesterday’s high of $3.54 to a new trend high and the 20-Day line, while a daily close above $3.57 confirms the swing breakout. Nevertheless, this is bullish behavior, and it establishes additional confirmation that the bearish correction is most likely complete.

Next Pivot, $3.75

If the price of natural gas keeps rising before a pullback, it heads towards the next pivot zone from the lower swing high at $3.75. A breakout above that level will trigger another bullish reversal signal. It is interesting to note that the convergence of the 20-Day MA, the 50-Day MA, and an AVWAP line from the April low, converged as price broke through. In addition, the prior uptrend line (dashed) was also part of the resistance zone. This makes today’s breakout potentially significant, and it increases the chance for a relatively shallow pullback, when it does occur.

200-Day Moving Average Support

Since the $3.53 price zone remains nearby, the 200-Day MA, now at $3.44, is a key potential support area. If natural gas continues to trade above the line, a bullish posture remains. In addition, a weekly bull breakout occurred this week, and it looks likely that the week will end above last week’s high of $3.47. That would confirm the breakout on a weekly basis.

$3.75 – Initial Upside Target

A key potential resistance zone shows from around the interim swing high at $3.75 to a prior swing high of $3.84 from May. The 61.8% Fibonacci retracement is within that range at $3.77. Given the likelihood that a bottom is complete, the supply and demand dynamics in a pullback should provide clues. In the short-term, the next potential resistance zone above today’s high is around the 50% retracement at $3.65.

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