Natural Gas Price Forecast: Wedge Breakout Setup Emerges

Potential Bullish Wedge and Capitulation Signals

There is a potential bullish descending wedge pattern that has formed in the daily chart for natural gas. The lower boundary line of the wedge was tested as support again on Monday with a new corrective low of $2.97. At that low the price of natural gas was down by 60% from the $7.44 January high. Monday’s shortened session, due to a U.S. holiday, triggered a break below the long-term uptrend line and prior swing low at $3.01. This may signal an early sign of capitulation, especially since the next largest of two earlier bearish retracements following the 2024 bottom, ended after a 46.5% decline.

Monday’s session ended with a bullish hammer candlestick formation. A rally above the day’s high of $3.10 will trigger a one-day reversal and put natural gas in a position to possibly breakout above the top line on the wedge. Nonetheless, a decisive advance above the small lower swing high at $3.32 (also a weekly high) will confirm a wedge breakout. Since a classic reversal pattern would be triggering from an important potential long-term bottom, the subsequent bullish reaction could see a continuation of recent volatility with a sharp move to the upside.

Breakout Triggers and Upside Targets

Nonetheless, the more significant lower swing high at the top of the wedge at $3.66 needs to be surpassed for natural gas to have a chance at higher prices. There is also the 200-day average nearby at $3.60. But since it would be responding to a reversal from the bottom of a large rising trend channel, the middle line of the channel becomes a potential minimum upside target. The 38.2% Fibonacci retracement at $4.68 can be used as a proxy for the middle channel line and a target unto its own. Each level has a good chance of being reached at a minimum, once there is a clear and sustained bullish reversal signal from current lows.

The possible one-day bullish reversal following a short drop below the $3.01 low shows a potential undercut and run pattern. It could be providing a clue showing a swing from sellers to buyers taking control. Nevertheless, additional signals are needed to confirm strengthening or negate the bullish scenario.