Natural Gas Price Analysis – Natural Gas Struggles to Overcome Psychological Barrier

Natural Gas Technical Analysis

Natural gas markets have recently rocketed to the upside to break above the $5.60 level at one point during the Thursday session, only to turn around and give back those gains. Quite frankly, this is a market that is overextended, but there is a reason it’s higher, and that is the cold snap that the United States is currently suffering through.

All things being equal, I think this is a situation where you’ll be paying attention to whether or not cold temperature is forecasted further out, as a winter storm warning has been issued for places like Ohio, Pennsylvania, and New York states, as well as a few others, and this, of course, will drive up the consumption of natural gas.

All things being equal, this is a market that I only buy in the wintertime, and that being the case, I think any pullback at this point in time ends up being a buying opportunity eventually.

Watch the Big Figures

I would watch the most obvious big figures such as $4.50, $4.00, $3.50, and so on. If we do take off to the upside, it seems to me like we’ve reached a little bit of overbought insanity for the short term, so we’ll have to pay close attention to that.

That being said, I also think this is a market that, even if it were to drop, I just don’t know how you short this market unless you’re very nimble. I’d be very cautious about that. The natural gas markets are extraordinarily volatile at times, and this is definitely one of those times.

However, a drop and then a bounce, having you buy on the right-hand side of the V shape, is something that I find very intriguing. I would, of course, keep my position size reasonable. That is prudent advice anytime you’re trading this contract, as the volatility can explode as we’ve seen all week.

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