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Christopher Lewis
Natural Gas

Natural gas markets have gapped lower to kick off the trading session on Monday, only to turn around and fill that gap. After that, the market has broken down significantly and it looks like we are getting a well needed pullback. Do not be wrong, this is not a sell signal, it just simply assigned that natural gas continues to be extraordinarily volatile, which of course is nothing new.

NATGAS Video 29.09.20

Looking at this chart, it is very easy to see that we could drop to the $2.60 level, perhaps even down to the 50 day EMA where the gap has been formed. I think that given enough time we should have an opportunity to pick up natural gas “on the cheap”, as we start to head into the colder months of the year. Ultimately, this is the likeliest scenario, that we get buyers on dips. After all, we are currently trading the November contract, and the future contracts going forward will of course feature December, January, and so on.

The US dollar falling could help, but even in US dollar strength we have seen natural gas go higher so I do not think that is going to be a big driver one way or the other. As temperatures drop, you should see natural gas rally. It is because of this that I am looking at dips as a potential pullback that I can buy, and therefore am not selling. Somewhere around $2.60 I think you start to see the beginning of buyers coming back into the market. A break above the $3.00 level of course is a market moving event as well.

For a look at all of today’s economic events, check out our economic calendar.

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