Natural gas markets initially tried to rally during the day on Wednesday but turned around to show signs of exhaustion again as we continue to hover around the $4.50 handle.
Natural gas markets initially tried to rally during the trading session on Wednesday, but the wedge that I have drawn on the chart is still holding, and as we approached the downtrend line of that wedge, the market of course rolled over. I think at this point we have gotten far ahead of ourselves and we have probably seen the high for the year at the $5.00 level. We are in a seasonably strong time of year, but I think that the market has overextended itself. The natural gas markets will start trading warmer contracts soon, and therefore we should see natural gas starts to sell off.
I believe that the market breaking below the uptrend line should send this market much lower, perhaps down to the $4.00 level. That’s an area that should be significantly supportive, but if we break down below there I think that the market will go much lower. Rallies at this point should continue to be sold, as we continue to see plenty of exhaustion. Ultimately, I believe sticking to short-term charts should be the way to go, as the overall attitude of the markets seems to be a bit overdone, and I think that the market will eventually go back down to the $3.25 level, perhaps even lower than that once we get into the spring. If we did for some reason break above the $5.00 level, the market should go much higher as it would be a bit of a “blow off top.” Expect volatility regardless but I do favor the downside.
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.