Natural Gas Price Forecast: Triangle Breakout Could Set Next Direction

Triangle Takes Shape as Range Narrows

Natural gas continued to consolidate on Friday as its recent trading range narrowed. The parameters of a symmetrical triangle pattern have now become more apparent, providing additional price levels for market feedback. However, dynamic resistance at the downtrend line is the next indicator that may provide insight into the developing pattern. Either price is rejected near the line, signaling renewed downside pressure, or the line is reclaimed, allowing the triangle to develop further. A break below the higher swing low of $2.69 would provide an initial breakdown signal.

Natural gas futures daily chart shows tightening consolidation below key resistance. Source: TradingView

Upside Breakout Faces Moving-Average Test

An upside breakout of the consolidation would first be indicated on a rally above the recent lower swing high of $2.87, followed by $2.89. A rally above the higher level of $2.89 would signal a reversal of the prior decline. That would put natural gas heading into a test of resistance near the 50-day moving average, currently near $2.95 and falling. Since it is falling and moving closer to $2.89, the distance between the breakout level and moving average is narrowing, which could limit the immediate upside potential.

Natural gas daily chart shows larger trend structure. Source: TradingView

Consequently, if an upside breakout occurs when the 50-day moving average is closer to, or has reached, the $2.89 price zone, then it could generate a stronger bullish reaction, as a breakout of both indicators would likely occur, increasing the significance of the bullish reversal signal and the potential for higher targets to eventually be reached. A key upside target above the 50-day moving average is the lower swing high at $2.98, which remains part of the recent sequence of lower swing highs defining the downtrend.

Bearish Structure Meets Strong Support

Although a symmetrical triangle can be a trend continuation or reversal pattern, depending on the way it breaks out, natural gas is in a bearish price structure on both the short-term and long-term timeframes, suggesting that downside pressure may eventually resolve the current short-term uncertainty to the downside. Having said that, natural gas is also in a potentially strong support zone that could certainly lead to a bounce to test resistance areas. That makes the developing triangle particularly important since a break below $2.69 would strengthen the bearish structure, while a move above $2.89 could shift the near-term balance back toward buyers.