Natural Gas Wedge Breakout Signals Strong Upside Targets

What to Know

• Wedge breakout confirms bullish reversal.
• Price holds 50-day moving average support.
• Bullish pennant forms at 100-day resistance.
• Break above $3.18 triggers continuation signal.
• Targets cluster $3.43–$3.56 resistance zone.

Bullish Reversal from Wedge Structure 

Natural gas futures are poised to continue the bullish reversal from a falling wedge pattern that triggered recently, along with the reclaim of several key moving averages. Those timeframes included the 10-day, 20-day, and 50-day moving averages. Strength was subsequently sustained during a sideways correction that resulted in a relatively tight range near support at the 50-day moving average. The switch to support for the 50-day average, after it previously represented resistance, is bullish behavior and constructive for the developing advance. That constructive price action now leaves natural gas positioned to challenge higher resistance levels, potentially extending the recovery phase initiated by the wedge breakout. 

Pennant Formation Under 100-Day Resistance

During the sideways consolidation phase, resistance has been seen around the 100-day moving average. The pattern formed is a small bullish pennant, where the consolidation range forms a small symmetrical triangle. Prior to its formation there was a sharp rally once the wedge triggered, which led to a high of $3.18 last week and the first test of resistance near the 100-day average. The subsequent consolidation near resistance may therefore represent continuation behavior rather than early signs of weakness.

Breakout Triggers and Confluence of Bullish Signals

A decisive move above the $3.18 high will trigger a breakout of the pennant and a reclaim of the 100-day moving average. A reclaim of the 100-day average would be more significant than the reclaim of the 50-day line as it represents a longer timeframe. In addition, a bullish trend reversal signal triggers above the lower swing high of $3.18, which is part of the wedge formation. That’s three bullish signals occurring in close proximity, adding to the significance of a breakout above current resistance levels. 

Upside Targets: 200-Day, Wedge Projection, Fibonacci Zone

Once the breakout is confirmed with a daily close above $3.18, higher targets come into view, specifically the 200-day moving average, now near $3.43. The larger price dynamic occurring is a pullback to test the long-term uptrend line as resistance, since it was previously marking support. An initial breakdown from the trendline occurred at the beginning of the year and again in early-February. Although there was a quick initial pullback after the February breakdown, a larger-scale retest of the trendline as resistance has not yet occurred, but may develop next. This analysis suggests that the potential of reaching the trendline increases the chance that the 200-day average is tested as resistance. 

Confluence Zone Near Long-Term Trendline

There are two other target levels leading up to the trendline that are above the 200-day line. The first is the initial target from the wedge formation, which is the start of the pattern near the lower swing high of $3.49.  Then there is a measured move projection from the pennant formation. The sharp advance that preceded the consolidation pattern is added to the breakout of the pennant, arriving at an approximate target around $3.56. Interestingly, that target aligns closely with the long-term trendline, depending on when the level is reached. There is also the 61.8% Fibonacci retracement of the prior decline nearby at $3.54.

Taken together, the clustering of resistance levels near the trendline reinforces the importance of the current bullish reversal structure discussed earlier, while also identifying a potentially significant decision zone. 

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