Gas price rebound is likely as market nears key $3 threshold

US natural gas (NG) prices have been trapped in a downtrend for over a month, giving back nearly 40% of their December peak. The steep October-November rally left behind little in the way of reliable support, thus leaving bulls struggling to regain their footing. Nevertheless, the market has just reached a critical juncture — the $3.3 threshold— which coincides with last winter's lows and the psychologically significant $3 level. In this make-or-break zone, the odds for a rebound have risen enough to make long positions compelling in terms of the risk/reward ratio.

Although it may seem to be promising to test the waters at current prices, the most prudent scenario is to wait for technical indicators to flash a clear reversal signal. For now, both the RSI and MACD remain in a bearish posture, though the room for further downside within the channel is running on fumes. A bullish momentum could ignite anytime, with the initial target set at the channel's upper boundary near $3.6. Any rally beyond that, however, would likely face stiff resistance from the recently broken 200-day moving average.

The first half of winter was unseasonably mild across much of the US, therefore dampening heating demand. Yet, surging LNG exports are now acting as a release valve, preventing a domestic glut. American storage levels are currently 3.5% below those of January 2025 and only slightly above the five-year average. In the meantime, Europe tells a different story: reserves have fallen sharply to around 50%, well below the typical 69% fill for this time of year. This has created a voracious appetite for US cargoes.

Analysts at Morgan Stanley view the past month's NG collapse as overdone. They predict an average price of $4.25 per MMBtu in 2026—more than 30% above today's levels—suggesting substantial recovery potential. Even without a severe cold snap, the stage is set for fuel to claw back a meaningful portion of its recent losses.

Pay attention to the trading strategy outlined below:

Buy gas in the range of $3–$3.2. Place Take profit at $3.6. Set Stop loss at $2.8.