Natural Gas Price Forecast: Intraday Bounce in Natural Gas Sparks Short-Term Optimism

Natural gas fell below Thursday’s low today to reach 2.52. Buyers stepped up from there leading to an intraday bounce. At the time of this writing natural gas is in the green and has reached a high of 2.62. But trading continues near the highs of the day. If it can remain near the upper quarter of the day’s range the day may end with a bullish hammer candlestick pattern.

Strength Indicated by 20-Day MA Rise Above 200-Day MA

Today’s low is a higher low than the recent swing low at 2.475, a very minor sign of strength as it is not known whether it will remain a low. Also, the short-term 20-Day MA has started to cross above the long-term 200-Day MA today. This is another sign of strength. Potential support around the moving averages therefore is critical for the sustainability of the rally. The 200-Day line is now at 2.455 and the 20-Day line is at 2.47.

Key Support at 2.46

A decisive decline below the recent swing low and moving averages will signal a deeper retracement. Depending on when it happens, a double top may also be triggered. This week’s high would create the second top. However, the double top is just a possibility until a breakdown triggers. At that point an eventual test of support around the 50-Day MA, now at 2.06, is a possible target. Higher price areas to watch for support include the area around the 50% retracement at 2.25 and further down is the 61.8% Fibonacci retracement around 2.10. Notice that the 20-Day MA has not been tested as support since the gap up on April 26.

Further Consolidation is a Possibility

An alternative scenario may see the price of natural gas further consolidate above the 200-Day MA. Initial resistance would be around the blue dashed downtrend line. Since it is a declining line the price level represented will be falling over time. Subsequently, if the 200-Day line remains an area of support the price range would be narrowing.

Keep an Eye on the Weekly Chart

The weekly chart should also be watched. Both last week and this week have large topping tails and the candlestick patterns are bearish shooting stars. Last week’s low of 2.49 was broken to the downside earlier this week but natural gas quickly recovered and is set to close above that low this week. Nevertheless, these are bearish indications but only if there is a decisive drop below the weekly lows.

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