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Natural Gas Poised for Higher Prices Once Support Tested
By: Bruce Powers | March 1, 2024

• Recent correction in natural gas saw steep declines, increasing potential for a counter-trend rally; a weekly close above 1.79 would confirm bullish breakout.

Upward momentum in natural gas stalled on Friday leading to a minor pullback to below Thursday’s 1.83 low. The low of the day was 1.81, a little shy of testing support around the 20-Day MA, which is currently at 1.795. A successful test of support at the 20-Day line and subsequent bullish reversal will confirm the initial breakout above the line two days ago. Such a development would show an improvement in the uptrend and that it is gaining strength. Therefore, a move to higher prices may be in the works once a successful test of support around the 20-Day line is complete.



Key Near-term Support at 20-Day Moving Average

The area of the 20-Day MA was clearly resistance on Tuesday, the day before a bullish breakout that saw natural gas close above the line. Once there are signs that prior resistance at the 20-Day MA has become support, upward momentum should be ready to proceed.

Due for a Continuation of Counter-trend Rally

The current correction likely completed at last week’s 1.52 low. That was a long-term support level from March 2020 and the subsequent bullish reversal on the weekly chart shows demand improving.

Just by the fact that the recent correction saw a 58.2% decline in the price of natural gas in only 17 weeks, increases the chance of a counter-trend rally of some degree. So far, it has been minimal. The rally has not yet reached the 38.2% Fibonacci retracement. Generally, that level of retracement is looked at as the primary minimum retracement of even a strong trend, a downtrend in this case.

Next Key Metric is a Weekly Close Above Last Week’s High

Further evidence for a near-term bullish outlook will be indicated by a weekly close above last week’s high of 1.79. At the time of this writing trading is happening above that price level and natural gas is on track to close above it. If it does, that will confirm the bullish breakout and increase the chance for a continuation higher. A range from the prior bottoms of the decline off the August 2022 peak at 1.95 to 1.97 would then be the next target. Above that price area is the 38.2% Fibonacci retracement at 2.04.

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