Natural Gas Price Outlook – Natural Gas Looks to Bounce

Natural Gas Technical Analysis

Ultimately, this is a market that I think is trying to find its way back to the upside, and with colder temperatures coming in a few weeks, it does make a lot of sense that the winter cyclical trade continues. All things being equal, I do like the idea of buying short-term dips and taking advantage of cheap natural gas in what is one of the most bullish times of the year.

The $4 level is a large, round, psychologically significant figure that has offered support. Really, at this point in time, I don’t see why you would short natural gas. There are massive dips like we just had from time to time in winter, but as demand continues to pick up in places like Boston, Philadelphia, and Pittsburgh, there is a higher price put on a shrinking inventory.

Inventory and Seasonal Outlook

Recently, the inventory just did not shrink as much as people had anticipated, and that’s why it had pulled back. That being said, we still have a couple of months of cold weather, and that is something I plan on taking advantage of. Just like once we roll over into the spring forecast, and temperatures start to rise, I will short this thing and hold onto that short position for a couple of months.

It’s a trade I take every year. I don’t put a lot of my portfolio into it, but it is good for a few percentage points in both directions. It’s a nice way to pad your returns. Natural gas is very difficult to trade by itself because it is so sensitive to weather, but it can be a great way to boost your gains for the end-of-the-year reporting. All things being equal, I won’t be shorting this market anytime soon, and it does look like each pullback is going to offer buying opportunities at least until probably the end of February.

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