Natural Gas Price Outlook – Natural Gas Faces Gravity

Natural Gas Technical Analysis

The natural gas market gapped lower to kick off the early hours of Tuesday, but we turned around to fill that gap and then dropped again. Ultimately, this range is not very big in the early hours of Tuesday, but it does suggest that perhaps gravity is finally coming back into this market. After all, the market had shot straight up in the air to show signs of explosive bullish behavior, but you cannot hang on to gains like that forever.

If the market were to drop from here, and I think it eventually will, we could go looking to the $4.20 level, possibly the $4 level, pretty quickly. After all, this is a contract that is trading in the month of December, and December is a very high-use month as temperatures in the United States and northern Europe will be fairly low, thereby driving up heating demand.

This is a cyclical market, and this is a time of year when I only buy. I have no interest whatsoever in shorting this market. I just do not think it plays out that way this time of year. In fact, the next couple of months are probably going to end up being very positive in general. But that does not mean we go straight up in the air. We have gotten overdone, and that overdone condition is probably what we are looking at now. We are far too extended, and a pullback is coming. What I am looking for is to buy natural gas on the right-hand side of the V pattern, if and when we finally get it.

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