Natural Gas Price Outlook – Natural Gas Continues to See Gravity Enter the Picture

Natural Gas Technical Analysis

The natural gas market has fallen a bit during the early hours on Monday as gravity starts to come back into the picture. Natural gas had exploded to the upside when the December contract opened, but we are beginning to see signs that temperatures are going to stabilize in a more seasonal pattern, meaning it will be warmer than it has been in the United States. This market is highly influenced by heating demand in the United States, and this time of year is typically fairly strong. I still favor this as a market to buy, but sooner or later, a pullback is needed to entice traders to lift prices again.

I look at a couple of different areas as potential support levels, such as $4.20, $4, $3.80, and the 50-day EMA. Any of those areas that we pull back to and then bounce significantly would be of interest because natural gas probably starts heading toward $5 sooner or later. That being said, I do not think it does it in one big move, and that is part of the problem here.

I would not short this market, despite the argument that it may be overbought. The best way forward is to look for value, and value means lower prices. You want to see a pullback, a dip—hopefully a fairly deep one—and then a bounce with momentum. That is the signal that value hunters have returned to take advantage of the seasonal cycle that is so prevalent in this asset.

For a look at all of today’s economic events, check out our economic calendar.