Natural Gas Rally Challenges Resistance: Is a Larger Upside Coming?

Natural Gas Forecast Video for 01.11.23 by Bruce Powers

It looks like natural gas has a mind of its own and has decided to cancel the correction and get on with the rally. Following a quick dip below Monday’s session natural gas turned up and rose all day to reach a high of 3.63 at the time of this writing. The rally is testing resistance around the prior trend high of 3.64 and it may just break through before today’s session is complete. Today’s (Tuesday) advance still has the potential to reach an outside day before the end of the session, although it is getting tight.

Bulls Take Control

Natural gas is showing real strength today as it flipped from bearish sentiment controlling price action early in the trading session to the bulls clearly being in control for much of the remaining time. It is on track to close with a wide range green candle like what was seen as momentum picked up on October 26 as natural gas was coming off a corrective low. Buying pressure has been strong enough to confront selling pressure on the way up as it has blasted through all potential resistance levels, except for last week’s high.

Signals Further Upside

This type of bullish one-day price action doesn’t usually end in one day. It is a symptom of underling buying strength. Subsequently, we will be watching for additional signs that the correction is over, and that natural gas is ready to continue higher. The first sign will be on a rally above last week’s high and then on a daily close above that high. At that point natural gas will be heading towards a resistance zone from around 3.78 to 3.86.

You can see how last week’s high and today’s high are stuck within the price range highlighted on the chart with a high of 3.64. Once the 3.64 level was reached last week overhead supply stopped the advance and price turned down to close at the low of the day. Today’s price action is negating that initial negative reaction. Not surprising given that that high was 27.3% up in only four days from the retracement low on October 23.

Watching for Bullish Channel Breakout

Finally, note that a daily close above the top trend channel line will show progress and may be the first clear sign that natural gas may be getting ready to break up and out of the rising channel.

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