Natural gas rallied to $2.78 after finding support at $2.64, setting up a test of the $2.86-$2.99 resistance zone. Traders said the move created a higher high and higher low.
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Natural gas rallied to a three-day high of $2.78 on Thursday, snapping a week of declines. The move created a higher daily high and a higher low after finding support at $2.64 earlier in the week. Technicians said the price action signals a potential reversal.
The move followed a failed breakdown below the $2.64 level. Traders said the quick recovery from that area suggested selling pressure had exhausted near term. A daily close above Tuesday's high of $2.76 would confirm the breakout, they noted.
The first upside target is the swing low at $2.86, which marks the start of a resistance band stretching to the recent lower swing high at $2.99. Technicians pointed to several indicators converging in that zone. The 20-day moving average, currently at $2.94 and declining, represents initial dynamic resistance. Above that, the 100-day moving average near $2.96 sits close to the $2.99 high and has acted as resistance on multiple previous attempts, traders said. A sustained move above $2.99 would signal a shift in the broader trend.
Immediate support is Thursday's low at $2.68, followed by $2.67 from Wednesday. If those levels give way, the next target is the 88.6% Fibonacci retracement near $2.60. A break below that would open the path to the April trend low around $2.50, which technicians said remains a probable target given the larger bearish trend structure. A move below $2.50 would mark a new low for the year and confirm the continuation of the downtrend, they said.
The moving average cluster between $2.94 and $2.96 is the critical battleground. If natural gas reclaims the 100-day moving average, it would suggest the recent corrective low was a more significant turning point. Until then, downward pressure is likely to persist, traders said. The declining 20-day moving average reinforces that resistance, they added.
The positioning data adds a layer to the setup. A related article on natural gas positioning noted that 207,000 short contracts face a heat test if the front-month contract holds support. That dynamic adds to the case for a squeeze if prices push through the $2.99 resistance, traders said. A squeeze could accelerate the move higher.
Technicians said confirmation of the reversal requires a daily close above $2.76. Without that close, the move remains a bounce within a bearish trend. The $2.86-to-$2.99 zone concentrates the resistance.
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