Natural Gas Price Forecast: Poised for Weekly Breakout

Natural gas is ending the week on Friday with further consolidation in the top half near the highs of Monday’s strong bullish key reversal day. Although the 2.82 to 2.64 price range is contained roughly in the top half of Monday’s trading range, reflecting underlying strength, today’s close may be the lowest closing price of the past five days.

In addition, notice the bearish tails for today and the past two days, as well as the weak closing prices, in the lower third of the trading range for each day. While this may lead to a deeper pullback, the bullish key reversal day from Monday, that was rejected from the 20-Day line earlier in the session (a clue), indicates that demand in natural gas is improving.

Support from 2.50 to 2.55

Near-term potential support is around 2.58 to 2.55, consisting of a prior interim high and the 20-Day MA, respectively. Also, a weekly low is at 2.51 along with the 50-Day MA at 2.53. So, in summary there is a potential support zone from 2.58 to 2.51, while a drop below this week’s low could lead to an even deeper pullback.

Formed an Inside Week

This week will end with an inside week for natural gas. Therefore, a potential weekly bullish breakout will be set up for next week. A rise above the week’s high of 2.82 will signal the breakout, while a drop through the low of 2.51 may lead to a deeper retracement.

Given the price structure for natural gas, the expectation is for an eventual upside breakout. One reason is that last week triggered a bullish weekly reversal from a retracement low. But this doesn’t mean the lower price won’t be tested before a bullish breakout. Nonetheless, the market will signal based on its reaction to price levels.

Signs of Strength Begin Above 2.75

Earlier signs of strength will first be indicated on a rise above today’s high of 2.75, and then each daily high for this week starting with Tuesday. Notice that there are four days in a row where the high price for the day was lower than the prior day. Nevertheless, a breakout above the weekly high, or swing high of the daily chart, will provide a more convincing bullish signal, that may subsequently lead to an upside breakout from a large symmetrical triangle pattern.

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