Natural Gas Price Forecast: Eyes Higher Prices After Weekly Bullish Reversal

Natural gas made a new rally high of 2.19 on Friday but failed to follow through much beyond yesterday’s high of 2.18. The interim swing high of 2.15 was exceeded yesterday and a close above that price level will confirm a breakout above the swing high.

That will provide the next sign of strength for natural gas. At the time of this writing, it is trading around 2.15 and may close above or below that level. Today is the fourth day in a row how higher daily highs and higher lows. Taking somewhat of a rest is not unusual and healthy for the trend.

Bullish Signs Following Descending Wedge Breakout

A decisive bullish breakout triggered on Wednesday as natural gas broke out of a bullish descending wedge pattern. Following the breakout upward momentum stayed strong. Each of the past three days closed in the top quarter of the day’s trading range. The 2.15 daily swing high is also a weekly high from last week. This means a weekly bullish signal was also triggered this week. So, a daily close above 2.15 will also confirm the weekly reversal. It follows seven weeks down from the most recent swing high at 3.16.

Further Rest Possible Before Trend Continues

There could be a pullback before natural gas progresses higher and, in that case, the first price level to watch is the 20-Day MA at 2.09. It was successfully tested as support with today’s low of 2.10. Lower down is the 50% retracement level at 2.04, followed by a price zone around the 2.03 to 2.01 daily lows from Thursday and Wednesday, respectively. That would also be roughly around the top boundary line of the wedge pattern.

Watching for Short Term Weakness

The degree of retracement, if it comes before a bullish continuation, may tell us something about the underlying strength in demand for natural gas. Of course, finding support at or above the 20-Day line and then continuing higher would be the more bullish behavior. Nevertheless, the weekly reversal was just triggered, and it indicates there will likely be a continuation to the rally. What is not clear is the aggressiveness of the rally. A prolonged retracement or consolidation prior to a bullish continuation is possible. But, given the clear bullish breakout this week it is also possible that the bulls maintain control into higher price levels.

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