Natural Gas Price Outlook – Natural Gas Drifts Slightly Lower

Natural Gas Technical Analysis

The natural gas market has shown some negativity in the early hours here on Wednesday, as we may have gotten too far ahead of ourselves near the $4.30 level. Ultimately, I’m looking for a pullback toward the gap from the beginning of the contract about six sessions ago, and then I’m looking to buy on a bounce. Over the next month, I expect to see more of a buy-on-the-dip attitude from traders, and natural gas should continue to enjoy strength as demand picks up for this December contract. The next couple of contracts will likely behave similarly, so I believe dips will be bought into.

I would approach this with low leverage, though, because natural gas is almost entirely driven by U.S. weather reports. A quick cold snap can send prices sharply higher, but if temperatures turn mild, natural gas can plunge. You have to be very careful with this contract. Other alternatives might include using an ETF to reduce some of the risk, but this is the time of year when I’m looking to buy dips, not sell.

Anytime it sells off, I look for a drop followed by a bounce, trying to take advantage of that rebound and stay on the right side of the market for this season—at least for the next couple of months.

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