Natural gas markets rallied a bit during the trading session on Wednesday, as the floor looks as if it is trying to be put in. There was a previous trendline that people have paid close attention to. If we can break above the $2.70 level, then it’s likely that the market could go higher. Ultimately though, I think this is a market that continues to be very noisy, and therefore you have to pay close attention to this trendline in the 61.8% Fibonacci level below.
What we are looking at is a situation where if we get a cold snap in the United States, that probably sends the market quite a bit higher. If we can break above that $2.70 level, then I think the next stop is probably somewhere near the $2.80 level. Natural gas is a cyclical trade, but at the same time, a lot of people are trying to price in a massive recession and therefore a lack of demand. To counter that, you can also look to the European Union where they don’t have natural gas and will be paying extraordinarily high prices.
Currently, Germany pays about 4 times what the US does and therefore I think it’s probably only a matter of time before this market catches up. That being said, don’t be over levered, it’s a situation where you could get hurt rather quickly as natural gas tends to move on the latest weekly weather report in the northeastern part of the United States more than anything else. Be cautious, but I do think that we are oversold at this point.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.