Natural Gas Price Outlook – Natural Gas Continues to Pull Back Despite Cold Temperatures

Natural Gas Technical Analysis

The natural gas markets have fallen again during the trading session on Tuesday in the early hours, and at this point in time, I think you have to look at the $5 level as a major resistance barrier. All things being equal, when you zoom out, you can see that $5 in the past has been important multiple times, going back three and four years ago. So, it’s not a huge surprise to see that there’s a little bit of a barrier here. The sudden turnaround was somewhat impressive and surprising, but perhaps we’re finally getting the pullback that’s necessary to continue going higher.

The $4.50 level would be an ideal area to look for some type of bounce. And if you can trade on the right-hand side of the V pattern that hopefully appears, that is typically thought of as the safer route. If we fall from there, the 50-day EMA is at $4.18 and rising. And then again, you have the $4 level. We are trading the January contract right now, but we are just a few weeks away from flipping over to the February contract. February is typically pretty bullish and interesting, but then once you get a few weeks after that, you start to think about spring. Remember, the futures markets are in the future. So as demand in the Northeastern part of the United States and Europe starts to wane, that will drive down the demand for natural gas.

The alternate argument is that AI data centers are going to need more electricity and, therefore, more natural gas. But there’s a very real world in which AI data centers are a bit of a bubble at the moment. And if that’s the case, natural gas will lose that leg to stand on. I think at the end of the day, you still have to trade it from a cyclical standpoint. So, I’m looking for buying opportunities. I don’t want to short natural gas when it is basically right now, where I live, three degrees centigrade in the Northeastern part of the United States. It just doesn’t make any sense. But there will come a time when you just get short and forget about it. Right now, you’re looking to buy dips and go with the longer-term trend.

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