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The natural gas markets broke out on Monday as the $3.20 level finally gave way. The fact that the markets managed to close above that area suggests to us that we are going to go much higher, and as such we are willing to buy this market on a break of the Monday highs.
The longer-term charts look as if there is an "air pocket" between current levels in the $3.50 level. Above there, it looks like we had even less resistance all the way to the $4.00 level, which suggests that we could have a nice little line about to happen. While we are not very bullish of natural gas for the long-term, it cannot be ignored that there seems to be a nice set up here.
Because of recent reaction around the $3.00 level, we think that the area should be a bit of a floor in the market, and we think that as long as we can stay above the $3.00 level we are in a "buy only" mode. Ironically, this was something that we didn't think we would be in for years. However, this is a classic example of doing with the charts tell you to do, and I will common sense does.
Looking forward, we think that this will be a great short term "buy on the dip" type of market that can be actively traded instead of investing in. This will certainly be a traders market, and not an investor’s type of marketplace. You have to remember, that there is plenty of natural gas out there to fill any type of demand, and as such we think the longer-term route will be down for this market, but we could essentially be in an area where we are simply getting a nice relief rally.
However, will even with all of the bullishness that we have just described, we think that the $4.00 level will be a massive selling point. It is at that area that we think we can look for a long-term selling position based upon weakness. However, as things look right now we think that the market is going to go higher.