Natural Gas Markets Continue to Show Hesitation Near $5.00

Natural gas markets of course have rallied recently due to the big storm in the northeastern part of the United States, but we are facing tough and significant technical resistance in the form of the $5.00 level. Not only is it a large, round, psychologically significant figure, but it is also sitting right in the midst of a cluster that forms support for the previous descending triangle.

NATGAS Video 02.02.22

Perhaps causing even more problems is the fact that the temperatures in the United States will be warming up soon enough, as we are already trading the March futures contract. This is not to say that we cannot go higher, it is just that the odds do not favorite, at least not for a bigger move. If we do break out above the highs of the Monday session it is possible that we could go looking towards the $5.50 level, but I think that only makes for an even more compelling short selling opportunity. I do believe at this point in time we have seen the highs in the natural gas markets, so I do not expect to see an explosive move higher. Yes, there could be a short-term lurch higher, but I do not think it is anything that is going to be sustainable.

To the downside I see a potential move to the 50 day EMA at the first signs of warming temperatures, or at least and into the storm. Keep in mind that most of the people trading natural gas futures are actually in the storm, so we may get a little bit more drama in the move than would normally be the case.

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