Natural gas markets drifted a little bit lower during the trading session on Wednesday, as we had gotten a bit of head of ourselves recently. After gapping the way we did early in the week, I think that we need to fall and fill that gap.
Natural gas markets remain somewhat elevated after gapping higher, as weather forecasts go back and forth. It looks as if we are going to have a somewhat colder winter than what we thought previously, and of course when you look at the daily chart you can see that the bullish flag kicked off as well. Ultimately though, when we Like this it’s quite often that we need to fill that gap.
I don’t have any interest in shorting this market right now though, and I think we need to be very cautious in doing so. Because of this, I simply think that a pullback into this gap probably represents value the people will be willing to take advantage of, as we have seen it over extension of the bullish pressure and quite frankly we would need to pick up more traders and by orders to go higher. I don’t know how much higher we go, but clearly there is a proclivity to rally. It’s not until we would break down below the $3.15 level that the uptrend would be in danger, as it would break the bottom of the flag. That doesn’t seem very likely to happen, at least not until we start trading warmer months in the futures pits, perhaps the March contract.
I think the $4.00 level above will be a major psychological barrier to break, and quite frankly I think it would take something extraordinary to get there but then again I’m the first to admit that I didn’t think we would get here. This goes right along with the old adage “the market can remain unreasonable much longer than you can remain solvent.”
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.