Natural gas markets went back and forth during the week, showing signs of resistance at the $2.80 level, and then the support at $2.60. I believe that the $2.60 level extends down to the $2.50 level. I think that the market should continue to be supported in that area, so if we break down below the $2.50 level, I think that the market probably unwinds to the $2.40 level. The alternate scenario of course is that we break above the $2.80 level and go looking towards the $3 level. I think there’s plenty of resistance in that area, but in general I think this is a market that’s probably easier to trade from short term charts overall, as there isn’t much in the way of room to move for the longer-term investor.
Looking at the longer-term outlook for natural gas, I think that selling will be the easiest way to go, as we show signs of exhaustion every time we do try to rally. The $3 level above should be the “ceiling” in the market, and I would be surprised to see if this market breaks out above there. Ultimately, this is a market that I think is good for traders to take advantage of and the futures market, going back and forth and trading based upon some type of oscillators such as the stochastic oscillator. Expect a lot of noise, and longer-term traders will probably find better opportunities in other markets.