Natural Weekly Price Analysis – Natural Gas Rockets Higher as Cold Snap Comes

Natural Gas Weekly Technical Analysis

The natural gas market has shot straight up in the air all week as a cold snap has hit the northeastern part of the United States. Cities like Philadelphia, Columbus, Pittsburgh, and New York have all been hit with very cold weather. In fact, this weekend has a cold advisory for various parts of that region, and of course, there is expected to be a significant amount of snow.

Because of this, demand is expected to pick up, and therefore, we could have a situation where traders are just looking at the potential drawdown from supply. However, it is worth noting that the market has shot straight up in the air in a pretty ridiculous amount. So I do think you’ve got a situation where the first hint of weather being warm enough for drillers to get back out into the field probably sends prices right back down.

Short-Term Top

It is also worth noting that we had peaked right around $5.60 and have pulled back to the $5.00 level. We are in the process of trying to determine whether or not this is a short-term top, and I think that would make a certain amount of sense. This is a knee-jerk reaction type of situation.

I don’t really like shorting natural gas this time of year, even if the price does start falling, because you could always get another weather forecast that suggests colder weather. But being married to the idea of going long in this market in the wintertime only means that you have to look at these dips and a potential bounce for a buying opportunity.

If you do play both sides of the coin, be very cautious. There’s a reason why the natural gas markets are nicknamed the widow maker. All things being equal, I think we do pull back a bit from here. The question is how far, and I think that’s something that will play out over the next couple of days.

If we take out the top of the candlestick, then we could get to the $7.00 level, which I suggested was possible about 2 months ago, eventually sometime this winter. That wouldn’t be overly shocking if we get colder weather. So, it’s all about watching those weather forecasts in the northeastern USA.

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