Natural Gas Tests $2.81; Breakout Would Reverse Bearish Trend

Natural gas rallied sharply on Monday and tested $2.81, a level that combines last week's lower swing high with the 20-day moving average. The front-month contract traded near session highs into the close, and buyers held control through the day. The test matters because a decisive reclaim would snap the sequence of lower highs and lower lows in place since early July.

That sequence has its roots in a falling flag pattern that triggered to the downside last week and produced a new trend low near $2.62. Monday's advance was the first pullback after that trigger, a classic setup where the flag's upper boundary gets retested. The pattern stays valid until price breaks above $2.81. A breakout would invalidate the flag's downside projection and, at the same time, confirm a reclaim of the 20-day moving average, which has acted as resistance since price fell below it in the first week of July.

Two scenarios follow from that setup. Resistance holds and price turns back toward last week's low near $2.62, preserving the downtrend. Or strength continues above $2.81, which would flip the short-term structure from bearish to neutral or bullish. The distinction is important because the flag's measured move still points to lower targets while the pattern remains intact.

On a breakout, the next resistance zone sits at $2.99 to $3.02, with the falling 50-day moving average at $3.03 stacked just above it. That indicator broke sharply to the downside on July 9 and has not been tested as resistance since. A move that far would complete a full reversal of the July decline and would put momentum traders squarely in the picture, several market participants tracking the futures said.