Natural Gas Forecast August 3, 2015, Technical Analysis

The natural gas markets fell during the course of the session on Friday, slicing through the $2.75 level. This of course is a very negative sign, but ultimately it’s only a matter time before we bounce. Because of this, the market should offer selling opportunities again and again. Quite frankly, we believe that the consolidation should continue in this marketplace, simply because we are in the middle of summer, which of course affects liquidity greatly.

We believe that the bottom of the consolidation area is a zone between the $2.65 level and the $2.60 level. Because of this, we think the market probably heads back towards that direction, but should find buyers in that area to keep the market somewhat active in choppy overall.

However, you have to keep in mind that range bound markets are some of the best markets to trade. You simply buy at the bottom, and then sell at the top in order to continue raking in profits again and again. Speaking of the top, we believe that the region between the $2.90 level and $2.95 should be significantly resistive to keep the market down. Most certainly the $3.00 level will be resistive as well, so at this point in time we are selling in that general vicinity once we get a bit of resistance.

Ultimately, we will have to break out of this range, but at the end of the day we feel that as long as the market offer such a clear-cut buying and selling area, we need to take advantage of it. The fundamentals for the natural gas markets are absolutely horrible, as both the United States and Canada have far too much in the way of supply to think that a sudden reversal in price is going to happen. Quite frankly, every time this market rallies we have been sellers. That’s been the case for a couple of years now to be honest, as this market looks very much akin to gold in the 1980s, when you simply sell rallies as they appear. However, at this point in time we feel that a very tight range has formed, so we can take advantage of trades in both directions.