Natural Gas Technical Analysis
Natural gas gapped higher to kick off the Thursday session, testing the $3.30 level. The $3.30 level has been important a couple of times recently, as we have seen it offer significant resistance, especially during the summer around June, when there were concerns about air-conditioning demand.
But now we find ourselves 2 to 2.5 weeks away from rolling over into the December contract, so we start to think about heating. At night in places like Columbus, Pittsburgh, and Cleveland, it is getting to roughly 45 degrees, and that will cause a little bit of heating demand. The problem, of course, is that during the day it is still 75 degrees.
Demand Is Starting to Pick Up, Slowly
We are starting to see signs of demand, but not enough to really draw down stocks, at least not significantly. At the end of the month, as we roll over into December, traders will start to focus on the idea that December is typically one of the stronger months.
Natural gas is heavily dependent on heating demand more than anything else in the United States, so make sure to watch the weather. There is one caveat this year: Europeans could find themselves importing a lot of liquefied natural gas from America, and that could definitely influence this market.
As things stand right now, though, we are still playing the weather game. Weather is starting to roll in natural gas’s favor, but we are still a little early in the season. I have shifted from bearish to neutral, and now I am neutral to slightly bullish, looking at dips as a potential opportunity, with the $3 level possibly offering support.
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