Natural Gas Technical Analysis
The natural gas markets have fallen rather significantly during the trading session on Monday as we continue to see a lot of demand destruction due to the warmer temperatures in the United States. In fact, we’re now starting to see the eastern half of the United States see warmer temperatures, and that is where most of the demand comes from.
With that situation brewing, it’s difficult to imagine a scenario where natural gas really starts to take off. I think the $2.70 level is your short-term floor and I look at the 50-day EMA at the $3.28 level as a significant amount of resistance. If we can break above there, then it could open up a move to the $3.50 level, but I think that would be very difficult to happen this time of year.
Later this year, once we get into the winter, it is possible that exports to Europe pick up quite drastically, and if that does end up being the case, then maybe this winter is a little bit more aggressive in pricing, but right now we just don’t have it. This is a market that, at this time of year, I do not look to buy, and I look to fade rallies that show signs of exhaustion.
Energy Sector Analysis and Trading Strategies
I like the idea of letting the market bounce and then, anywhere near the 50-day EMA, start selling at the first signs of exhaustion. If we break down below the $2.70 level, then we could open up a move down to the $2.50 level, which we probably will see before it’s all said and done over the next several months. Natural gas is abundant and it is priced as such.
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