Natural Gas Price Consolidation: Searching for Clues Amid Low Volatility

Natural Gas Forecast Video for 03.11.23 by Bruce Powers

Natural gas sees further consolidation as volatility declines. For the past two days natural gas has been stuck within Tuesday’s trading range with a high of 3.63 and a low of 3.32. The low is important near-term support while the high is a little below the trend high of 3.64. Greater significance is placed with the trend high. In other words, an upside breakout needs to surpass 3.64 on the upside for a proper bullish signal.

Volatility Dampened as Natural Gas Trades Inside Tuesday’s Range

Although today’s trading saw natural gas dip below yesterday’s low, where it closes Thursday’s session may provide additional clues. In general, a drop below yesterday’s low is bearish in the short term. However, in this case both today and yesterday’s price action are influenced by the fact that it occurred within Tuesday’s trading range. This can have the impact of dampening volatility and making short term signals less reliable. Nevertheless, we’ll be watching for where natural gas closes relative to today’s trading range and yesterday’s low of 3.43.

A daily close above 3.43 and above the halfway point (3.455) of the day’s range will be somewhat more bullish than if the close is below the halfway point or below yesterday’s low. At the time of this writing natural gas is showing greater strength than it might as it is trading above yesterday’s low and slightly above the middle of today’s trading range. Given the characteristics of today’s range, it will leave a lower shadow in today’s candlestick pattern if it closes in a similar or high position. Trading began near the top of today’s range, which begins the body of the pattern.

Upside Breakout on Rally Above 3.64

Since Tuesday was a relatively wide-ranging day and we’re already seeing a second day of trading contained within that range, further consolidation may occur before momentum picks up and the next direction is clearer. An upside breakout is signaled on a rally above the 3.64 trend high, with natural gas then targeting a price range from around 3.78 to 3.86. That range includes the 23.6% Fibonacci retracement at 3.86 and the completion of a rising ABCD pattern at 3.78. As noted above, support is at three days low of 3.32 and a drop below it will likely lead to a deeper retracement.

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