The natural gas markets sold off during the week, forming a very negative candle after forming a hammer from the previous week. If we continue to break down below the previous week, that would turn the hammer into a “handyman”, which of course is a very negative sign. At that point, I think the market will continue to go lower, perhaps reaching towards the uptrend line. If we break down below the uptrend line, the market then unwinds down to the $2.60 level after that, an area that was previous support. If we do this, then we are simply going back and forth in the longer-term consolidation.
The $3.00 level above should continue to be massive resistance, and I think that will continue to be a bit of a “ceiling” in the market, and I think it’s only a matter of time before we sell off on attempts to break above that level. I believe that over the longer-term, it’s likely that we will find value hunters closer to the $2.60 level, and at this point I don’t think that the longer-term outlook for this market changes much. I think we continue to go sideways overall, and therefore a range bound system is to be employed not only on short-term charts, but also longer-term charts as you can see so clearly on the weekly timeframe. I believe that we have gotten ahead of ourselves.