Natural Gas Forecast December 17, 2012, Technical Analysis

The natural gas markets fell during the session on Friday, but did get a bit of a bounce right around the $3.30 level in order to stay somewhat buoyant and form a hammer. At this point time, the market certainly has been sold off rather aggressively over the last couple of weeks; the bounce now wouldn’t surprise us.

Looking at this chart, we still feel that this market will continue to be bearish overall, but we would prefer to see some type of rally in which to start selling. Perhaps a move back up to the $3.50 level would be a bit handy, however, we are not willing to close out of are already short positions. We think it’s obvious at this point that the $3.00 level will be retested before it’s all said and done in this marketplace, and the warm weather in the United States certainly isn’t helping any type of bullish sentiment in this market.

With this being said, there is a pretty wicked gap at the $3.00 level that will offer quite a bit of support. We will more than likely be flat at that point time, and we do believe that a bounce could be fairly strong from that particular area. However, that gap has not been filled yet, and that just invites short selling.

As far as buying is concerned, we are not interested at this moment as the recent fall has been quite brutal. There can be no doubt as to whether or not it was “serious”, and as such is difficult to try to take a countertrend trade at this point. In fact, we think that this market will probably go much lower than $3.00, although we do think that it will be a straight shot down.

As long as there is far too much natural gas for the marketplace to absorb, we think that the longer-term trade will always be to sell this market, much like we saw in the gold pits for 30 years. There were entire careers made of people who sold the gold every time rally and we may be entering a situation like that in the natural gas markets.