Natural Gas Price Forecast: Compression Points to Volatility Expansion

Volatility Compression Near Apex

Consolidation continued in natural gas on Friday, as it remained sandwiched between two trendlines in a large symmetrical triangle-type formation. As it moves closer to the apex, volatility looks likely to contract until there is a breakout of the pattern. The apex of the pattern is projected to be reached around April 15, which means it will occur before then. Although the formation is not a typical symmetrical triangle given its shape and location, the significance of a breakout remains, reinforcing the importance of the current consolidation phase.

Key Levels Define Near-Term Direction

In addition to a breakout triggered through a trendline, Wednesday’s higher swing low at $2.90 is a key near-term support level. On the upside, a break above an interim lower swing high at $3.29 provides an initial sign of strength, while exceeding the March 9 lower swing high at $3.49 would indicate a more significant break of resistance. However, the downtrend line will have already been broken by then, suggesting that other indications of strong resistance are likely to emerge nearby.

Overhead Trendline Reinforces Resistance

Given the current situation on the daily chart, if natural gas rallies above the downtrend line, it looks likely to remain below a long-term uptrend line, which now represents potential resistance. Last week’s high of $3.49 validated that thesis, as it marked a successful test of resistance near the uptrend line. The subsequent sharp bearish reaction further validated the significance of the trendline as a defining resistance area.

Confluence Zone Builds Overhead Pressure

Moreover, both the falling 200-day and 100-day moving averages are converging toward the trendline and will shortly help define a potentially strong resistance zone below it. Currently, those moving averages are part of a confluence zone from approximately $3.55 to $3.63. There are currently three trend indicators identifying the resistance zone, and they are joined by a 61.8% Fibonacci retracement at $3.60 and a measured move target at $3.58. This suggests that rallies may remain under pressure if natural gas remains below the long-term trendline, keeping the broader consolidation structure intact.

Breakdown Levels Signal Bearish Continuation

Since recent price action remains below the uptrend line, a break below the higher swing low at $2.90 suggests that sellers are regaining control. That would signal an initial bearish trend continuation. Bearish confirmation would then be provided on a drop below $2.81 and then $2.58, completing the transition from consolidation to downside resolution.

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