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The natural gas markets fell apart on Friday as we had suspected was going to be the case. The nasty shooting star that formed on Thursday suggested that the buyers were exiting the market en masse, and Friday simply confirm that. The $2.80 support level gave way as the selling pressure was relentless. Of particular note, the shooting star that was formed on Thursday had the highest volume day in months. This suggests to us that the move was real, and we are going to begin drifting lower again.
The $2.70 level is crucial. If there is any hope at all for the buyers in this market this level must hold. If it does not, we see a move down to $2.25 without much trouble. In fact, this is essentially what we expect to happen, and are willing to hold onto short positions until we had at least $2.00 as we think that handle will attract support again. As for buying, we simply will not do it.