- The natural gas markets fell initially during the trading session on Thursday but found the $3 level to be enough support to turn things around and cause the market to bounce.
- The market is currently trading in a $0.20 range, between the $3 level and the $3.20 level.
- Ultimately, we are trying to figure out where we are going to break and in which direction, but you also have to keep the seasonality of the natural gas market in the back of your mind.
Seasonality and Volatility
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Keep in mind that this is a very volatile market, and therefore it’s likely a market that you will have to be very cautious, as it is a market that can get away from you rather quickly. If we break down below the $2.80 level, then I think the “trapdoor” opens, and that could send this market down to the $2.50 level. On the other hand, if we can turn around and break above the $3.20 level, then we probably go looking to the previous uptrend line, perhaps even the 200 Day EMA which is currently at the $3.36 level.
Furthermore, you should also keep in mind that this time of year typically has a certain amount of negativity due to the fact that there isn’t much in the way of demand. After all, there isn’t a lot of concern about heating, which is one of the major drivers of where this market goes. Furthermore, we also have a lack of demand for air conditioning, which of course natural gas is a component for in order to run them, as electricity is quite often created in the United States by burning it.
In other words, there is a lot going on at the moment. The so-called “death cross” is about to form with the 50 Day EMA dropping significantly to reach toward the 200 Day EMA. This could of course send longer-term short sellers back into the market. Regardless, I prefer to short this market every time we rally and show signs of exhaustion as has been the case for a couple of months.
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