- The natural gas market was fairly quiet during the trading session on Thursday, as we are hanging around the crucial 50 Day EMA.
- The 50 Day EMA is likely to continue to attract a lot of attention, and therefore I think you need to recognize that this is a market that is probably going to be lacking any serious major conviction in one direction or another.
- When you look at the chart, you can see that we might be getting ready to form some type of consolidation, but the boundaries are still somewhat in the air.
Consolidation
If we are going to consolidate, it’s going to be a massive consolidation area from what I can see. At the top, we would have the $3.85 level, and at the bottom the $3.15 level is probably the floor. While I still favor the downside overall, because this time of year is horrible for natural gas demand typically, the reality is that markets are all over the place mainly due to what’s going on in Europe with natural gas.
We did have a moment where on Wednesday the natural gas market was ready to shoot straight to the moon, as storage numbers came in much lighter than anticipated in the United States, but the reality hit that demand isn’t going to be very strong either. Because of this, the market had at one point gap $0.50 higher, only to give most of it back. With that, it shows just how hard it’s going to be to truly take off to the upside, and I think ultimately this is a situation where you look to feed signs of exhaustion after short-term rallies, but also recognize that this is an extraordinarily volatile market, and therefore yet to be very cautious with your position size because natural gas is a great way to lose money if you are on the wrong side.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.