Natural Gas Price Forecast: Surges Following Reversal from Key Support

Natural gas continued its bearish decline on Thursday before finding support at a new retracement low of $3.73 and rallying. Support was seen around the prior interim swing low of $3.74 from early-March and a 61.8% Fibonacci retracement level at $3.72. Given the subsequent bullish response following a minor undercut of the prior swing low, it looks like the first steps in a counter-trend rally may have been met.

The rally from the day’s lows took natural gas to a two day high of $3.96, at the time of this writing, triggering a bullish breakout of an inside day. Moreover, natural gas continues to trade in the top third of the day’s trading range and may end the day above $3.93, thereby confirming the bullish signal.

Bullish Outside Day and Hammer

Furthermore, an outside day will be established today along with a likely bullish hammer candlestick pattern. Wednesday’s high was $3.93 and if natural gas closes above it today, the inside day breakout will be confirmed. Also, notice the relationship to the declining parallel trend channel. There was a breakout above the top of the channel and the day’s closing price may also be above the line.

The prior interim swing low at $3.96 can be used as a proxy for the line. Earlier in the day natural gas reclaimed the 50-Day MA on a move above $3.88. Therefore, the recovery since dropping below the line on Tuesday was relatively quick and therefore a bullish indication.

Upside Initial Target is 20-Day Moving Average

An initial upside target for natural gas should be around the 20-Day MA, now at $4.11. Since there is also the 38.2% Fibonacci retracement at $4.18, they can be watched together for signs of resistance. A little higher is a prior interim swing low at $4.26, also a weekly high. Since it is part of the recent decline, it represents a key potential resistance level, as a rally above $4.26 will signal a bullish reversal of the bearish correction.

Week May End in a Strong Position

Since there is only one more trading day to the week, today’s advance may establish a bullish weekly candlestick pattern. That would set up a potential bullish reversal on the weekly chart going into next week. If that happens then the higher targets should be more likely to be reached. Of course, there is always the possibility that trading next week is contained within this week’s price range.

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