Natural Gas Price Forecast: Rallies to Trendline Resistance, Breakout Possible

Despite a potential bearish reversal day yesterday, natural gas continued to ascend on Friday to a new trend high of 2.93. However, it continues to trade near the highs of the day and may yet show further gains before trading closes for the week. The advance followed an initial dip below Thursday’s 2.73 low earlier in Friday’s session, to the day’s low of 2.72. Subsequently, buyers took back control to help drive the price of natural gas to a new trend high. The day shows characteristics like a bullish reversal day and therefore the rally may continue heading into next week.

Possible Symmetrical Triangle Breakout

As discussed previously in this column, natural gas has been tracing out a symmetrical triangle consolidation pattern for over six months. The first lower boundary line rises from the February trend low, but a new and higher bottom line was added once the late-August higher swing low was established.

Once price reverses from the low end of a consolidation pattern, the chance for a move to the opposite side of the pattern increases. Support was successfully tested at the low end of the natural gas symmetrical triangle at the late-August low. The subsequent rally opened the possibility of an eventual test of resistance at the top downtrend line.

Bullish Reversal Today Shows No Sign of Stopping

Today’s high may be that test as natural gas is very close to the top trendline. So far today, it has found resistance at the interim swing high from May 23. However, given the clear bullish momentum that has followed the drop below yesterday’s low from earlier today, the top trendline may be hit in the coming days or a breakout through the line could occur. Today is likely to end with a wide range green candle and the close is on track to be strong, in the top quarter of the day’s trading range, which also means it closes near the highs for the week.

Can Natural Gas Breakout and then Keep Rising?

Since upward momentum began after price was rejected to the upside from the 200-Day MA support area last week, a breakout above the trendline in the coming days may not see enough buying pressure to continue to support higher prices in natural gas before a pause or retracement. There is also a good chance the top line will retain resistance and lead to a retracement before an attempt at an upside breakout occurs. Keep in mind that such a move would also trigger a bullish breakout of the triangle formation as well as a trendline. Nonetheless, other than prior swing highs the first higher target looks to be around 3.45.

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