Natural Gas Price Forecast: Tests Key Resistance After Rally to $4.55

Natural gas rallied to a new trend high of $4.55 on Tuesday, before hitting resistance that led to an intraday pullback. Resistance was seen around the 50% retracement of a long-term internal downtrend and around a top trendline or a rising channel. Notice that each of the prior two advances met resistance around that top line of the channel as well. This may indicate a couple of things. Either the price zone marked by the two indicators continues to show signs of resistance, or the bulls bust through it and natural gas heads towards the next higher potential resistance zone.

Upside Channel Breakout Possible

An upside breakout would signal a breakout of the rising parallel channel that shows some degree of symmetry within the price structure of the uptrend. Caution is warranted as there is a strong risk of a false breakout. Nonetheless, the next higher target zone is from around $4.70 to $4.72, derived from two extended Fibonacci levels. A little higher is a potential significant target zone as it would complete a 38.2% Fibonacci retracement of the full decline that began following the $10.03 peak in 2022. The 38.2% level is at $4.77.

Bullish Monthly Signal

Today’s rally triggered a bull trend continuation signal on the monthly chart (not shown) as last month’s high of $4.78 was exceeded. A daily close above that high will provide some confirmation of strength indicated by the upside breakout. Moreover, notice the pullback to a new retracement low of $3.74 on Monday that occurred before buyers stepped in and took back control.

A decisive bull breakout of a small wedge followed, and the day ended in a strong position near the highs of the day. Can demand remain strong enough for a breakout through the top of the channel? Possibly. But it may then quickly run out of bullish momentum. However, it will depend on whether it occurs before a minor pullback or not.

Slingshot Setup

The initial decline yesterday that occurred before a sharp rally was a clue that bullish momentum could accelerate. There was a confluence of several indicators around that price area, including the 50-Day MA, 20-Day MA, and 50% retracement. When multiple indicators point to a similar price it tends to be significant.

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