Natural Gas Tests $3.25 Breakout Level as Uptrend Holds

Natural gas hit a seven-day high of $3.26 on Tuesday, clearing the lower swing high of $3.25 from last Wednesday and confirming a bullish reversal. The session also established a higher daily low of $3.13 near the confluence of the uptrend line and the 20-day moving average. Short-term strength showed up in a reclaim of the 10-day moving average, which had held as resistance for four straight days last week.

Tuesday's price action also pushed natural gas back above the 100-day moving average, a level that had tested buyers repeatedly since the start of last week. A daily close above $3.25 is needed to lock in the breakout.

The uptrend is showing signs of holding. A short downtrend line marks the next target zone near $3.32, though that line is declining and will represent a lower price starting next session. A break above it puts a resistance zone from roughly $3.36 to $3.40 in play. Given the momentum, those levels could be reclaimed on the way toward higher targets.

The 200-day moving average was tested as resistance alongside the $3.40 trend high. It now sits near $3.43 and presents another upside target. A lower swing high at $3.49 from early March provides a further target zone, not just as a swing high but as the start of a falling bullish wedge that initiated the current uptrend. The initial target from that pattern is typically the beginning of the formation. While that higher target may not be reached, its existence supports the case for the 200-day moving average to be tested again as support at a higher price.

Underlying the recent price action is the first pullback to test prior key dynamic support as resistance after a significant breakdown. In February, the long-term uptrend line broke, leading to a continuation of the bearish trend and a low of $2.50 in April. The current advance is the first notable pullback toward that uptrend line to test it as resistance. The relationship to the 200-day average is similar, though it broke in early February, a little before the trendline. Once that process completes, the larger bearish implications of the trendline break may reassert themselves.

Bruce, a seasoned finance MBA and CMT charter holder with over 20 years in financial markets, has worked as head of trading strategy at hedge funds and a corporate advisor for trading firms. He shares futures expertise to retail investors through technical and fundamental analysis.