Natural Gas Price Outlook – Friday Continues the Chop at Support

Natural Gas Technical Analysis

The Natural gas markets dropped a bit in the early part of the Friday session, and as you can see, the market is just hanging around the $3 level. The $3 level of the course is a large, round, psychologically significant figure that a lot of options traders will be watching, as well as spot and open pit traders. The natural gas market of course has just seen the 50 day EMA cross below the 200 day EMA kicking off the so-called death cross and that is a very negative turn of events.

It does make a certain amount of sense to see weakness this time of year because there isn’t a huge demand for heating, and the summer, although it can drive up electricity demand for air conditioning, it hasn’t been particularly brutal in the US. So, I find that interesting that we are just hanging around this $3 level. Perhaps it’s the floor in the market, but I do recognize that if we were to break down below the $2.85 level, then it will be a fresh new low, and we will probably go looking at the $2.50 level.

Rallies at this point in time are possible, but I think you also have to keep in mind that the 50-day EMA and the 200-day EMA crossing near the $3.34 level probably puts a bit of a lid on how far we can go to the upside. I like the idea of taking trades to the downside after rallies that show the first signs of exhaustion. That’s probably how I’ll be trading natural gas for the next several weeks. We are getting somewhat close to the time when futures markets start to look towards fall, which of course we’ll see maybe a little bit of a pickup. So that’s why this could be the basic floor. We’ll just have to wait and see.

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