Natural Gas Price Analysis – Natural Gas Continues to Move on Cold Weather in the USA

Natural Gas Technical Analysis

The natural gas markets have risen another 25% or so during the early part of the trading session as foreign traders are betting on cold weather in the United States driving natural gas consumption higher. This does make sense. We have several really cold days ahead, and that, of course, has a major influence on where we go from here, at least in the short term.

This time of year, I only buy natural gas, but after a spike like this, one would have to think that short sellers are sitting here very interested. You can see that the $5 level was like a massive ceiling in the market. While I am not suggesting that we can’t get above there, what I am suggesting is that this market will pull back. It simply cannot run like this forever.

Production Is at Extreme Highs

To begin with, we have plenty of natural gas in the United States, and natural gas production is at an extreme high. That being said, the market is likely to see a little bit of momentum due to the fact that it is so cold that production is stopping in certain areas. But that is a temporary thing, and that is exactly why I think short sellers will be looking at this.

I am not shorting it, but I do recognize $5 is a pretty strong area to play off of. A pullback to $4 would make perfect sense. I think we may get it eventually, but the real trade is going to be once the cold weather disappears altogether, and if natural gas is up near $5 or $6, you short that and you walk away until summer.

We will have to wait and see when that plays out. Right now, it is a little early for that trade, so I do think a drop and then another bounce probably comes later this winter. I would not be chasing it after a massive run as we have had over the last 2 days. This is a perfect example of why retail traders shouldn’t be trading natural gas.

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