Natural Gas Price Analysis – Natural Gas Drops on Rollover

Natural Gas Technical Analysis

Natural gas has gapped to the downside on Wednesday yet again and quite frankly this is a market that is just dead money at the moment. The cold temperatures that have hit New York City and the snow and everything else that you’re seeing on the news have not been enough to draw down the massive amount of supply of natural gas that we have in the United States.

Of course, when you’re trading futures contracts, you have to keep in mind that we are focusing on April. We’re rolling over into April during the session here on Wednesday, so that has natural gas dropping because in April demand typically falls. The spot market may look a little bit different, but really at this point in time natural gas is going to be a situation where you’re looking to fade any rallies that show signs of exhaustion.

Technical Outlook and Resistance Levels

In the futures market, the $3.50 level is a significant amount of resistance just waiting to happen, especially as we have a gap that ends basically right there. Then we have the 50-day EMA trying to break down below the 200-day EMA kicking off the so-called death cross. I wouldn’t read too much into that because the market is so sold off already, but it shows you just how much trouble there is for natural gas.

If we continue to drop from here, we could go to the $2.60 level, possibly even as low as $2.40 and I do expect that to happen eventually. I don’t like shorting all the way down here. I want to see it bounce a bit so I can take advantage of a little bit more runway for my trade.