Natural Gas Technical Analysis
The natural gas markets have rallied slightly during the early hours after initially gapping higher. Despite this, the market is still facing significant resistance just above. In particular, the $3.50 level is expected to remain a major barrier. Even if prices manage to break above it, I would be more interested in shorting the market at the first signs of exhaustion. A long wick, or even a strong negative candle would suffice for this trade.
With that in mind, I am watching for a long wick to appear, as it is most likely, as a signal to start shorting. Cooler temperatures are approaching in the United States, but this is likely one of the last major blasts of cold air for the season. Given this, I do not see a compelling reason to be a buyer of natural gas. Instead, I would prefer to let prices rise and then short the market as it shows signs of weakness.
If the market declines from here, support can be found at the $3.20 level, as well as around the $3.00 level, which aligns with a trendline and the 200-day EMA. Ultimately, this market has been quite bullish until recently. However, this shift in sentiment is understandable, given that natural gas is a highly cyclical commodity, and we are now approaching the end of the high-demand season. Remember, as the temperature in the United States climbs, it will bring a lack of demand, at least until it gets hot in the summer.
For a look at all of today’s economic events, check out our economic calendar.
