The natural gas markets went sideways initially during the trading session on Friday, reaching around the $2.68 level and exploded to the upside as the inventory number came out much more bullish than anticipated. However, the $2.75 level has offered a bit of resistance, and I think at the moment we are more than likely to see a bit of a pullback. If we can break above this level, then I will look at the $2.80 level as an area to start selling, as it has been resistance in the past. A break above the $2.80 level won’t even be enough for me to start buying, because I recognize there’s even more resistance at the $3.00 level. In other words, I have no interest in buying this market as the longer-term picture for this commodity is very negative with the longer-term oversupply issues.
I think that the $2.60 level should offer support, and I believe that the support should extend down to the $2.50 level, but it will also take a lot to break down through there. In other words, the best way to play this market from what I see is to wait for these types of rallies, and then sell them once they get a bit overextended or show signs of running out of momentum. I believe this will continue to be the way in this market, as natural gas is certainly a market that has more than enough supply to keep the sellers interested.
