Resistance Breaks as Buyers Regain Control

Natural gas spike higher on Monday, breaking above key resistance levels to reach a high of $2.24, at the time of writing, as colder weather is forecasted. Buyers remain in control with trading continuing near the highs of the day. The advance triggered a breakout above last week’s high of $3.04, which was an inside week, and extended of the advance from the October low of $2.50.

Strength was also indicated by a decisive reclaim and likely daily close above the 200-day moving average near $3.02. In addition, the 78.6% Fibonacci retracement of the prior advance was exceeded with little hesitation. That was a potential resistance level, but demand was strong enough to bust through it.

200-Day Reclaim Opens Door to Higher Targets

The reclaim of the 200-day moving average could be significant, since it follows recent failed attempts to stay above it. In addition, it would indicate that the recent decline below the August swing low has failed to follow-through. Therefore, this new reclaim of the 200-day moving average could attract buyers for a potential bullish signal above the recent lower swing high of $3.33. If that occurs, higher targets become possible, starting with the June lower swing high at $3.40. Above that level is a higher swing low from March at $3.49. Notably, a sustained advance above $3.40 would trigger the breakout of a large rectangle consolidation pattern that began from the April swing low.

Short-Term Support Determines Breakout Potential

Monday’s low of $2.99 is key support, especially since it aligns with the 200-day moving average at $3.02. The fact that the day’s low found support near the prior resistance indicator is bullish price behavior. Along with the sharp advance into a resistance range, bullish momentum seems to be building for an eventual upside breakout. Nonetheless, short-term bullish momentum began from the low of $2.84 last Wednesday, suggesting that it may not be strong enough to sustain an upside breakout before a pullback or consolidation occurs to build demand.