Natural Gas Drifts Below $3 as Heat Waves Fade

Natural Gas Technical Analysis

The natural gas market is below the $3 level, and it looks as if it is trying to go down to the $2.75 level. Ultimately, this is a market that is paying close attention to the fact that there is a significant lack of heat at the moment, so as the heat wave has come and gone, it drives down the idea of demand in the United States, and clearly, we don’t have a heat issue with the demand that we see in the winter.

So, I think you continue to look at short-term rallies as selling opportunities. The $3.50 level above is a bit of a barrier, and if we were to break above the $3.50 level, then it could open up the possibility of a move to the $4.50 level.

Seasonal Context and Cyclical Play

As things stand right now, I think we are getting a little stretched to the downside, so I’d look for a rally to start fading again. I’d never buy natural gas this time of year, and even if we do get some type of massive heat wave coming out there, the spike that would show up in the market that shows signs of exhaustion, I’m willing to jump all over, I’m willing to start shorting.

I don’t buy natural gas until we start to get towards the fall, when we’re trading winter contracts. You’ll see a gradual rise in the market, and then, of course, cold weather will cause spikes. This is a market that is very seasonal, very cyclical. That’s all it’s doing, is playing out that same seasonality and cyclicality. Short-term trading is preferred because, quite frankly, big moves are unexpected.

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