Christopher Lewis
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Natural Gas

Natural Gas markets initially pulled back during the course of the trading session on Friday but then turned around to form a bit of a hammer. All things being equal, this is a bullish candlestick, but is still just in the middle of consolidation. The $3.00 level above is a large, round, psychologically significant figure that will obviously have a major effect on the psyche of traders. At this point in time, the market is likely to see resistance above there as well, so at this point in time it is likely that sellers would come back in and push this market to the downside.

NATGAS Video 10.05.21

On the other hand, if we were to break down below the lows of both Thursday and Friday that could send the market down towards the $2.75 level. The 50 day EMA is of course reaching towards that area, and underneath that will have a gap that continues to be important on longer-term charts. Ultimately, I think that gap does get filled but we need to see signs of exhaustion. In the short term, I like the idea of trying to short the market on signs of exhaustion closer to the $3.00 level. If we do break above that level, then I think there is a massive barrier of about $0.20 above. At the end of the day, we are oversupplied with natural gas, and of course temperatures are more than likely going to rise quite significantly over the next few weeks, driving down the idea of demand for this market.

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