Natural Gas Price Forecast: Sharp Rally Targets Higher Resistance Zones

Natural gas accelerated an advance on Monday off the recent 2.015 swing low of 2.015. That low completed a 36.2% bearish correction. A five-day high of 2.27 was reached today before there were minor signs of resistance. Where natural gas closes Monday’s trading session will be telling. Slightly stronger demand will be indicated on a daily close above 2.19 rather than below that price level. Given the wide range green candle for today, natural gas looks like it will be testing higher potential resistance levels before this bounce is complete.

Bullish Momentum Points to Higher Targets Starting with 2.39

Today’s sharp rally triggered a breakout of the internal downtrend line, and the subsequent strong bullish reaction shows the market aware of the line. Once the internal downtrend line is broken, the higher trendline becomes a target. Since the purple 20-Day MA, currently at 2.39, recently converged with the higher downtrend line, it can be watched together with the trendline as a potential resistance zone. Moreover, the 20-Day line is quickly followed by a confluence of indicators showing potential resistance at a range from 2.44 to 2.48. It starts with the blue 200-Day MA at 2.44, and includes the 38.2% Fibonacci retracement at 2.45, then ends at an interim swing low of 2.475 from May 28.

The May 28 swing low had significance previously as it was part of the rising price structure of higher swing lows and higher swing highs. Once it was broken to the downside following the June 11 trend high, another bearish reversal signal was indicated. It happened to correlate with support around the 200-Day MA at the time.

Higher Target Zone Begins at 2.57

In case the 2.475 level is broken to the upside, the next higher price zone looks to be from 2.57 to 2.59. The first level is the orange 50-Day MA and the second is the 50% retracement zone at 2.59. Of course, if this higher price level is reached, natural gas will be back above the 200-Day line, 20-Day line and downtrend line, a sign of strength.

Weakness an Opportunity to Position for Upside Continuation

Given the above short-term bullish scenario pullbacks into today’s price range of 2.09 to 2.27 will likely be used by traders as an opportunity to position themselves for a continuation of today’s bounce. If last week’s low completed the retracement, then not only is the 20-Day MA an initial target, but today’s bullish momentum may be the beginning of an advance that eventually attempts another breakout of the top long-term downtrend line.

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