Natural Gas Price Forecast: Technical Signals Hint at Potential Price Pullback

Natural gas struggled to retain recent gains following a possible false breakout above a rising trend channel. A double top pattern can be seen in the relative strength indicator (RSI) along the bottom of the enclosed chart, and the RSI has turned down. This also reflects a weakening of short-term momentum along with the potentially false breakout of the channel pattern. Whether these indications lead to a pullback remains to be seen.

Hits New Trend High of 4.01

Natural gas rallied to a new trend high of 4.01 on Thursday and generated another sequential higher daily high and higher low, the sixth day in a row. At the time of this writing, it continues to trade near the lows of the day, which was 3.67.

That is short-term support and if it is broken to the downside a drop to test support around the prior trend high of 3.56 is likely or a test of the 20-Day MA, currently at 3.37. The 20-Day line is a key dynamic support indicator for the near-term bull trend as it was tested and held as support on several days since the October swing low (red). That trend is marked by a rising ABCD pattern (red).

Above 20-Day Line is Bullish

If natural gas can retain a position above the 20-Day line, it has a chance to continue higher as the uptrend lower boundary would be retained. It is interesting to notice that there are several rising trendlines that cross above current price levels at approximately 4.39 and 4.45.

Those levels are within a potential resistance zone that begins around 4.33 to 4.42. That price level is the initial target from the red ABCD pattern shown on the chart. The crossovers also show possible resistance around the price zone. Therefore, it makes sense to expand the target zone to 4.33 to 4.45.

Bullish Outlook Retained

Notice that natural gas could continue to advance higher and stay within the top channel line and internal rising trend line. Together, they generate a potential rising wedge pattern. One possibility to consider is that natural gas could proceed and stay within the boundaries of the pattern to eventually reach the 4.33 target without breaking through either boundary line of the wedge.

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