Natural Gas Price Forecast: Trendline Support Holds to a Four-Day High

Short-Term Strength Builds Above Near-Term Support

The price of natural gas strengthened on Friday, jumping to a four-day high of $2.71 and completing a successful test of resistance at the 10-day moving average. This is the second consecutive higher daily high and higher low, while the week is likely to end with natural gas at its highest daily closing price in seven days. These are signs of improving short-term demand that may continue to build in the near term, supporting the case for a reclaim of the 10-day moving average.

Reclaim Attempts Face Layered Resistance

A decisive rise above the 10-day average sets the stage for a test of resistance near the 20-day moving average, now at $2.81 and falling, as well as a potential bullish reversal signal for the short-term downtrend on a rally above the interim lower swing high at $2.72. However, such a move would not significantly improve the outlook for a reversal of the broader bearish trend. That won’t add value though to the potential for a bullish reversal of the larger bearish trend. The 50-day moving average provides a higher potential target if the buyers can retain control, currently sitting at $2.98 and continuing to decline.

Dominant Downtrend Still in Control

Resistance is anticipated to be found eventually, leading to a continuation of the dominant downtrend, as the long-term uptrend has already produced several bearish reversal signals since February 17. In addition to dynamic resistance near the moving averages, the long-term uptrend line marks a more significant potential resistance zone. The 200-day moving average is falling towards the trendline and will provide a more precise potential resistance area if approached.

Confluence Zone Could Attract Price Before Reversal

Since both the trendline and 200-day average are long-term indicators, it remains possible that price could be drawn higher to test this confluence zone before another move lower. The price zone could also act a magnet, pulling prices toward it, where the probability of a bearish reversal may increase. The 200-day average was tested once on a swing, but the trendline was recovered during that advance. This suggests that a lower swing high near the uptrend line may develop, and if the 200-day average aligns within the same zone, a stronger resistance area is likely to form.

If you’d like to know more about how to trade natural gas, please visit our educational area.