Natural gas markets have gone sideways during the trading session on Monday, bouncing from the $3.30 level. That’s an area that offers significant support, and I think that breaking down below there would be a very negative sign. We would probably drift towards the $3.20 level underneath, and then eventually the $3.10 level. I anticipate that the market will continue to be very noisy but will eventually find sellers again. We are overbought, and most certainly oversupplied longer term.
There is a massive barrier above, especially at the $3.50 level, which of course is psychologically important. It is also an area where we have seen structural resistance in the past, so I’m looking for a breakdown with some type of strong volume to start selling. I will point out that most of the stronger candles have been red volume wise and should continue to show signs of exhaustion as the move on the longer-term charts have been so overdone. Ultimately, I believe that the market will find itself closer to the $2.75 range within the next couple of weeks than above $3.50. However, if we were to break above there it would be a very bullish sign and could send us into unknown territory as of late and could throw a lot of things into question. Typically, the market peaks in mid-to-late January, which is exactly where we are, meaning that this may be more of a seasonal thing than anything else.