Natural Gas Price Forecast: Potential Pullback Looms

Natural gas continued its rally earlier in Monday’s trading session as it briefly rose above a target zone before finding resistance at a new trend high of 3.94. That high led to a pullback that put it in a position to close weak relative to the day’s trading range, and down for the day. Moreover, today’s closing price is likely to also be below the prior trend high of 3.83. Given the bearish reaction to a new trend high today, it looks possible that the 3.85 to 3.88 target zone eventually had an influence. Nonetheless, follow-through will provide additional clues.

Short-term Outlook Falters

Note that for the most part trading today in natural gas has stayed above prior resistance at 3.64. That was the 2023 high and top of a large symmetrical triangle pattern. Therefore, it potentially was an impactful breakout that should eventually see a continuation to the upside. However, in the short term the possibility of a pullback exists and improves on a daily close below 3.64. The target zone that was breached today consisted of the 38.2% Fibonacci retracement at 3.85 and the 127.2% extended target for a rising ABCD pattern (orange) at 3.87.

False Channel Breakout

It is not just the bearish reaction to the target zone, however that is a cause for concern, resistance was also seen around the top channel line of a rising trend channel. Notice that on Friday natural gas touched the line specifically as resistance as the high of the day at 3.83 was at the line. Arguably, the top channel line could be moved a little higher and touch the November swing high rather than the October swing high. In that case, the argument for short-term resistance is amplified.

Watch Price Action Around 3.56 and 3.0

A correction, if it were to occur, could take the form of relatively sideways consolidation or a deeper pullback. The rise above the top of the channel is an indication that prices may be getting too far from the mean and due for a pullback and realignment. Other price levels to watch besides the 3.64 high include the most recent trend high at 3.56 and the 20-Day MA trend indicator at 3.32. If a rally above today’s high occurs before a correction, then the next upside target is 4.06.

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