The natural gas markets rallied significantly during the day, gaining over 1% before struggling near the $2.78 level. That is an area that has shown the lot of noise and resistance, and therefore it would not surprise me at all to see this market unwind a bit. The $2.70 level underneath is a massive support level that extends down to the $2.60 longer-term, which could very well be the target. If we break above the $2.78 level, the market will probably see a significant amount of resistance extending to the $2.80 level. It is because of this that I am looking for an opportunity to start shorting this market on signs of exhaustion and ignoring the bullish sentiment that we have seen over the last two days.
Overall, I think that the market continues to be a “sell the rallies” type of situation, and that it’s only a matter of time before there is a reason to start shorting again. The market will probably find plenty of interested sellers on these rallies, because quite frankly the oversupply of natural gas is a well-known fact. There is a Thanh of supply near the $3.00 level as well, so even if we do rally short term, there is a definite “ceiling” in the market. With this being the case, I remain very bearish overall and am looking for opportunities to sell at higher levels in general. I do think we break below the $2.70 level eventually.