Natural Gas Weekly Price Outlook – Natural Gas Strengthens for December Contract

Natural Gas Weekly Technical Analysis

Natural gas has rallied to break well above the $4 level as we have now rolled over into the December contract, which is, of course, one of the colder months of the year. We are heading into winter, so I look at this as a buy-on-the-dip market as the psychology and cyclicality of the market line up quite nicely. You can see that the previous winter looked very much the same — we rallied, saw a sudden pullback, rallied again, and then that was the end of it.

The question for this winter is whether or not we can break that crucial $5 level. It certainly looks like we’re going to try, but I don’t think we’ll get there in the next week or two. In fact, the candlestick for the weekly timeframe is basically drawn based on a couple of gaps, and those gaps should get filled. That’s what we saw last month as we gapped higher into November, pulled back to fill that gap, and then took off. I’m looking for more of that same type of action.

So, it’s a bit of a wait-and-see market, as natural gas is volatile and you don’t want to jump in too quickly with a large position. But this time of year, it’s essentially a one-way trade, and the nice thing is that we look to find natural gas cheaply, knowing that demand will pick up over the next couple of months. Being patient is the way to go here, but it should certainly pay off in the end.

You don’t want to chase natural gas all the way up here only to see it pull back by 60 cents. Then you’re forced to wear those losses and white-knuckle it on the way back up. Speaking from experience, that’s not how you want to do this.

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