Natural Gas Price Forecast: Tests Resistance at Top of Symmetrical Triangle Pattern

Natural gas again challenged resistance on Wednesday around the top boundary line of a large symmetrical triangle pattern. Yesterday’s high of 2.91 was exceeded slightly with a new trend high of 2.92. Also, natural gas fell below yesterday’s low of 2.79, reaching a new low of 2.77 and establishing an outside day.

This is an indication of uncertainty as the process of price discovery happens in an area where resistance was encountered. Where the day ends may provide a little short-term insight as a close below yesterday’s low of 2.79 will be weaker than a close above it. Further, if the session closes above the halfway point of the day’s trading range at 2.845, it will be a stronger indication than a close in the lower half of the day’s range.

Potential for a Breakout

A decisive advance above the top line that is followed by a continuation higher indicates an initial breakout of the triangle consolidation pattern. However, subsequent price behavior is key to guard against a false breakout. Since the most recent swing high was at 3.02, it should also be considered since it is relatively nearby.

A rally above that high would further confirm strength as a prior swing will have been reclaimed. However, a daily close above it is needed to complete that breakout. That swing is part of the price structure of lower swing highs that occurred since the 3.64 peak in 2003. The top boundary line defining resistance of the symmetrical triangle formation touches those highs.

Pullback Possible

Since resistance has been seen so far, a bearish retracement may be next on the agenda. Weakness is indicated on drop below today’s low of 2.77. Also, a decline below yesterday’s low of 2.79 can be seen as a gauge. The 38.2% Fibonacci retracement is at 2.65 and it may be the first price zone to see signs of support. Lower down is possibly a more significant support zone from 2.58 to 2.56 as it marks the confluence of several levels. A prior high resistance and now possibly support was at 2.58 and it is joined by the 50% retracement at 2.57 and the 20-Day MA at 2.56.

Lower Support Levels

Price behavior around the 20-Day line will likely provide the most value as it helps identify support of the near-term trend. It has been trending down since a little before the last swing low. However, the 50-Day MA has been trending up since mid-September and is now at 2.44. If natural gas breaks below the 20-Day MA and continues lower the 50-Day line becomes a potential target. Moreover, the 61.8% Fibonacci retracement can be watched as well at 2.48.

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