Natural Gas Price Forecast: Breakout Signals Bullish Momentum Toward Higher Targets

Natural gas triggered a trend continuation signal on Thursday as it broke out to a new trend high of 3.59. It continues to trade near the highs of the day at the time of this writing and may hit a new high before the day’s close. Therefore, there is a chance for confirmation of the breakout with a daily close above the prior trend high of 3.56.

Recently, natural gas established that the near-term remains in place as it successfully tested support around the 20-Day MA and established a higher swing low at 3.09. Today’s close will likely retain strength by ending in the top third of the day’s trading range.

First Pullback Following Breakout is Complete

The first pullback following the breakout of a large symmetrical triangle pattern completed at the December 4 swing low of 2.98. That was around the triangle breakout area of 3.02 and it sets the stage for a bullish continuation as prior resistance was tested as support. Today’s breakout occurred two days following a reversal day established on Tuesday, which also generated a higher swing low.

Support at Today’s Low of 3.39

Near-term support is at today’s low of 3.39. A decline below that price could lead to another retest of support around the 20-Day MA, currently at 3.27. As noted previously, the 20-Day line was successfully tested as support on several days recently. Support was indicated by the daily closes above the line, even though earlier the price of natural gas had traded below the 20-Day line. Of course, a key support area is the interim swing low from Tuesday at 3.09 because it generated a higher swing low and holds the second point of a rising trendline.

First 3.64, then 385

A daily close above 3.56 will confirm today’s breakout. There could be a clear pickup in momentum that takes natural gas straight to test resistance around the top of the triangle pattern at 3.64. But given strength indicated following the symmetrical triangle breakout, that price level is expected to be exceeded. Notice that following the November 20 breakout, natural gas quickly took out prior swing highs at 3.16 and 3.09.

That was a sign of strength that should return once the 3.56 high is exceeded. Initial higher targets would then be anchored around a 38.2% Fibonacci retracement level at 3.85. Higher up is an extended target from a rising ABCD pattern (purple) at 4.06, followed by an initial target from a smaller ascending ABCD pattern (red) at 4.33.

For a look at all of today’s economic events, check out our economic calendar.