- Natural gas markets initially fell during the trading session on Friday but then turned around to show signs of life again.
- We are currently testing the $3 region, which is an area that obviously would be interesting from a large, round, psychological standpoint.
- With that being said, the market is likely to continue to see a lot of noisy trading, but I think we also have a big fight on our hands in this area. After all, the natural gas markets have a lot to digest at the moment.
Seasonality and More
Keep in mind that there is a lot of seasonality in this market, as a huge portion of demand comes in the form of heating homes in the United States. As the weather has warmed up, it makes quite a bit of sense that demand would drop. This is a trade that I keep in mind every year, as we quite often will see selling pressure once the temperatures climb in America, as demand drops. Furthermore, we also have to keep in mind that there are a lot of concerns out there about a recession, and natural gas is a market that is instrumental in electricity production, as it is quite often the use for that.
Because of all of this, I think it’s very difficult to get bullish about natural gas, and short-term rallies are probably going to end up being selling opportunities. I would like the idea of letting this market bounce a bit, seeing an exhausting candle, and then selling. I look at the 200 Day EMA near the $3.30 level as a potential barrier, right along with the $3.50 level. It is not until we break the role of that that I would consider getting long in this market, because it’s got too many things working against it at the moment.
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