- The natural gas markets initially tried to rally in the early hours on Thursday, but it looks like the $2.50 level will continue to be an area of extreme interest.
- I think at this point in time we are getting close to some inflection point that could determine where we go for the next several weeks.
- This is not a huge surprise, because quite frankly the nonsense that we have seen in the natural gas markets was overdone yet again.
This is not a retail market
I know I’m not supposed to say this, but quite frankly natural gas markets are not a retail market. You have no business trading this but since I know many of you will do it anyway, I will do my best to break down what you are facing. We got overextended and now we need to find some type of natural level to sit. In other words, it’s overbought and now we need to correct.
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That being said, you also have to understand weather patterns in the northeastern part of the United States, whether or not the Europeans are going to be coming to Henry in Louisiana to buy more natural gas, as this is the contract you are more likely than not trading, and whether or not storage and transmission lines allow for more or less supply. This is literally what your trading.
However, my email box is almost always full of questions about natural gas, so I am cognizant of the fact that a lot of people are trading it. At this point, I would anticipate that natural gas could very well fall to the $2 region, and I do think that it would be of value there. However, if you follow my work you know that I very rarely trade this with a lot of leverage, but do in fact trade it via an ETF. This allows me to take advantage of price appreciation or the depreciation, but not doing so with a ton of leverage. It’s the leverage that seems to get most people in trouble.
If you have the ability to invest and not trade, this could be a great market, but right now I just don’t see why would put a lot of money into this market try to “catch a falling knife.”
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