Natural Gas Price Forecast: Consolidates Near Highs, Poised for Breakout Move

Natural gas continued to consolidate near recent highs on Thursday, and it is set to close lower for the day and as an inside day. At the time of this writing, the high for the day was $4.47 and the low $4.25. Today would be the second consecutive inside day and it reflects a tightening of consolidation. Therefore, there is the potential for a sharp move in the direction of the breakout of the inside days.

Since Thursday will likely end as an inside day, Wednesday’s high of $4.52 and the low of $4.23 provide the outside price range for the past two days. It should provide more reliable price levels for signals versus Thursday’s price range.

New Trend High Stalled Advance

A new trend high of $4.55 was reached on Tuesday and the day ended with natural gas in a relatively weak position in the lower half of the day’s trading range. Moreover, the closing price was the second highest level for the bull trend, but it was not the highest.

That is not a convincing response to a new bull breakout as it shows short-term weakness, rather than improving strength. Then, on Wednesday a new closing daily high was established at $4.52. And Wednesday’s high of $4.52 completed another test of resistance around a top trend channel line that marked a resistance zone for the three most recent rallies.

Top Channel Line Remains Resistance

Previous attempts to break out above the channel line have failed. This would seem to put greater weight on the possibility of a bearish retracement rather than a bullish continuation. Nonetheless, the behavior of natural gas around key near-term price levels mentioned above will provide clues.

Although demand remains relatively strong given the two days of consolidation that further tested resistance around the channel line, a sustained upside breakout and a continuation of the bull trend may have greater success following a pullback first, or a longer rest in consolidation.

Bullish Weekly Price Action

On the weekly time frame natural gas showed strength this week. This week’s rally began following an initial bearish move to test support at a confluence zone that is marked by several indicators. Of significance is the 50-Day MA, now at $3.77. That line was joined by the 20-Day MA and a 50% retracement level. It was the first real test of support at the 50-Day line since it was reclaimed on February 13.

Having both the 20-Day and 50-Day lines converged around the support zone likely contributed to the sharp rally once it was tested as support. Subsequently, a weekly bull breakout triggered on a rise above last week’s high of $4.19. This seems to be supportive of a bullish continuation of the rising trend above $4.55. If so, the $4.70 area is the next upside target.

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