Natural Gas Price Forecast: Forms Bullish Pattern After Retesting Key Support

Natural gas pulled back to retest support on Friday around the bottom of a descending trend channel and a 78.6% retracement level. Once a low of $3.39 was established buyers took back control and drove the price of natural gas back above Thursday’s low of $3.47. Notice that the lower channel line and 78.6% retracement are marking approximately the same potential support level today. The fact that two methods, including one dynamic trend indicator, mark the same potential support area is a bullish sign. And more so given the subsequent intraday advance that followed.

Forms Potentially Bullish Hammer

At the time of this writing, natural gas continues to trade above the midpoint of the day’s trading range and looks likely to end the day with a potentially bullish hammer or doji hammer candlestick pattern. The high for the day was $3.58. Earlier in the session a breakdown of an inside day pattern from Thursday triggered, resulting in a test of support as mentioned above. Since a potentially bullish one-day pattern followed, today’s closing price is likely to be above Thursday’s low of $3.47. This sets up a potentially bullish pattern heading into next week.

Three-Day Bullish Combo Forms

Nonetheless, it is not just today’s pattern that is potentially bullish, it is also the combination with the patterns of the prior two days. Since natural gas is likely to close inside yesterday’s range and in the top half of today’s price range, the bearish breakdown shows signs of a failed pattern. The three-candle combination is a potentially bullish hikkake pattern. It can be both a reversal or continuation pattern and it will trigger on a rally above Thursday’s high of $3.75.

However, an advance above today’s high can provide an earlier valid bullish signal regardless of the hikkake pattern being present. Given the three-period combination, it is a potentially powerful short-term pattern. Of course, a drop below today’s low is short-term bearish and indicates a failure of the potentially bullish pattern

Potential Resistance at 50-Day Moving Average

Initial upside targets start with the four-day high of $3.83 and the 50-Day MA, now at $3.89. A declining trendline at the top of the channel may also be around the 50-Day line when approached, and it may provide clues. Subsequently, if an upside breakout of the downtrend line triggers the 50% retracement at $4.12 becomes a potential target, followed by an interim swing high and 61.8% Fibonacci retracement at $4.26 and $4.30, respectively.

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