Natural Gas Technical Analysis October 13, 2011

Natural gas markets fell on Wednesday, proving the hammer-like candle on Tuesday to be a “hanging man” as the bottom was broken through. This is a massively bearish signal, and the market looks set to continue the move down as has been the case for quite some time. The supply simply is far too high for the demand, and as such this market is a one-way trade for the foreseeable future.

The market looks ready to continue the downward trajectory, and we think that selling at this point is the prudent thing to do. We simply cannot buy the market as the trend is against that move, and every time we have seen a pop in this market – the move is simply a reason to sell again. Until something fundamentally changes, or we get a daily close above the $4 mark, we are selling rallies, and feel that buying is impossible.

A break of the Wednesday low also has us shorting this market, and aiming for $3 in the long run.