Natural Gas Forecast October 14, 2014, Technical Analysis

The natural gas markets rose during the course of the session on Monday, bouncing off of the $3.80 level yet again. With that, the market appears to continue to consolidate overall. With that, the market looks as if it’s one that can be bought, but we would be very cautious as it is against the overall trend. Remember, natural gas markets have been beaten up rather sick the early, and with good reason as the supply is simply far too strong to keep prices elevated.

With that being said, we think that the top of the consolidation area is somewhere near the $4.10 handle, and as a result if we started buying at this point in time we would have to certainly take profit somewhere near that area. That tells us that we could probably count on very choppy trading conditions, but as this market continues to grind sideways, we feel that eventually somebody will take over. In the meantime, this is one of the best range bound markets to trade right now in the financial markets that we know of.

If we broke down below the $3.80 level, this would then be a market that needs to break down and continue to go to the $3.50 level. The $3.50 level is a large, round, psychologically significant number and it should attract quite a bit of support. Because of that, the market will more than likely offer a nice selling opportunity if we get a daily close below the $3.80 handle, and offer a continuation of the longer-term downtrend.

You do have to keep in mind though that the seasonal aspect of natural gas markets does favor a little bit of bullishness, but ultimately we believe that the supply is going to keep any rally for colder temperatures in the northeastern for the United States under wraps. We might get a little bit of a bounce, but at the end of the day it should be short-term in its longevity. Ultimately, we feel that rallies continue to invite selling but we do recognize that there is a short-term buying opportunity at this point.