Successful Test of 20-Day MA is Bullish

Today’s price action shows a successful retest of support around the 20-Day MA, which followed the first successful test on November 4. It potentially clears the way for a possible new breakout attempt about the 3.02 high (B). The last attempt failed attempt occurred on Wednesday. It remains to be seen whether that high retains resistance or whether a sustainable bullish breakout triggers. A daily close above 3.02 would confirm a breakout and put natural gas in a position to test higher potential targets.

Near-term Symmetry Points to 3.22

The first target would be the swing high from August at 3.16. But that level should be easily surpassed given the potential for a strong market response. There are two patterns that would be triggered. A sustained rally above 3.02 would trigger a breakout of a large symmetrical triangle pattern, as well as a continuation of the rising trend that began from the August swing low.

If the 3.16 high can be exceeded, the completion of a small rising ABCD pattern (purple) point to 3.22. But that is a relatively easy target to hit and possibly surpass. A more significant target range looks to be from 3.35 to 3.45, which is where there is a confluence of targets from Fibonacci projections and price structure.

Watch Behavior Following a Breakout

Regardless of the potential for higher targets to be reached as indicated by the analysis, how the price of natural gas behaves following a breakout should provide clues as to the strength or weakness of demand. There is always the possibility of a failed breakout. In general, the breakout of a trendline may not be as reliable as a break above a horizontal price level. This is why a break above a prior swing high in natural gas, especially if it makes up part of the triangle structure can be an important confirmation of strength.

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