Natural Gas Price Forecast: Wedge Breakout Targets Higher Levels

Short-Term Reversal Structure Forms

Natural gas triggered a one-day bullish reversal on Friday, establishing a higher daily low of $2.74 and a higher daily high of $2.85. That high was a three-day high that followed a successful test of support near the 10-day moving average at the low of the day. Recently, the 10-day average confirmed improving short-term bullish momentum by crossing above the 20-day moving average for the first time since late-March. On Thursday, the 20-day moving average was confirmed as support during the first pullback after it was reclaimed on April 30.

Wedge Breakout Lays Foundation

The reclaim of key moving averages follows an upside breakout of a falling wedge pattern last week. Since the wedge occurs in a downtrend, it represents a bullish reversal pattern. As with any pattern breakout, there is the potential for improved momentum following a breakout as demand has been building during the consolidation phase. Resistance near the 50-day moving average limited that advance, leading to resistance and a swing high of $2.88.

Key Resistance Near $2.88

The 50-day average and swing high are now in a classic position to be exceeded in an upside breakout. The 50-day line is now near $2.86. The short-term pullback to test the 20-day average as support is bullish price behavior and better prepares for an upside continuation. This suggests that, if $2.88 is exceeded, the potential for an improvement in momentum is high.

Broader Trend Context and Upside Potential

In the bigger picture, another rise to test prior trend support as resistance could occur to satisfy a standard dynamic of price. Long-term trend support was broken in February following a breakdown below an uptrend line and other than a minor pullback, an upswing is due. A key potential resistance zone shows from around $3.28 to $3.49. The 78.6% Fibonacci retracement starts the range, and it ends at the top of the wedge. However, more significant resistance is represented by the falling 200-day moving average, now at $3.41.