Natural Gas Technical Analysis
The natural gas market has rallied a bit during the early part of the session on Tuesday. The $2.80 level continues to be a significant amount of support, with the $3 level above being a bit of a resistance barrier.
The 50-day EMA is currently at the $2.88 region, very flat, suggesting that we don’t really have much in the way of momentum at the moment. I do think at this point, continuing the overall consolidation makes sense.
Focus Turns to November Contract Rollover
The market is going to switch contracts into the November month, and the November month starts to take in the idea of colder weather. It cooled off a little bit during the trading session on Monday, but we are still a long way from seeing temperatures change enough to alter the storage situation.
While we did see a little bit of a drawdown over the last week, it is not enough to make natural gas exactly scarce. There are questions about liquefied natural gas going to Europe later this year, but as things stand right now, we have more than enough natural gas in the U.S., and that does put a little bit of a lid on the market.
If we could break above the $3 level, then we can start to talk about whether or not momentum rips to the upside. We are in what is known as the shoulder season, that is, between the two busier seasons. There is not much demand for air conditioning, and there is not much demand for heating, so a lot of times we will just flounder. I think the average sideways, range-bound day trader is probably taking advantage of that right now.
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