- Natural gas initially gapped higher to kick off the trading session on Monday but then ran into a buzzsaw of resistance.
- Now, keep in mind Monday was Memorial Day in the United States, so liquidity may have been a bit of an issue, but in overnight extended hours and electronic trading, we have seen natural gas sell off. This makes quite a bit of sense considering that the natural gas demand in places like the United States and Germany will drop due to the fact that temperatures are warmer, but not extraordinarily hot. This is a typical move this time of year when traders start to look at the fact that demand drops off of a cliff.
- We had recently seen a nice bounce, but a lot of that came down to the idea of refilling stocks in the United States after a long winter. Because of this, I am looking for an opportunity to get short of this market on each and every short term rally that shows signs of exhaustion.
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I do believe that eventually we go looking at the $3 level, which given enough time could offer a little bit of support, but I also recognize that it has been broken previously. A breakdown below that level then opens up the possibility of a move down to the $2.85 cents level and with that I would be definitely looking for some type of support. If we broke down below that level, then I think that's the end of it. We dropped to two dollars. This is a market that quite frankly I think remains very difficult to be a buyer of and I think anytime you get an opportunity to sell from a higher level, you should take it. I believe that we are going to continue to see a lot of downward pressure on natural gas. And then on top of that, you have to recognize that the supply is overwhelming the demand, especially as people are concerned about a recession. I just don't like natural gas this time of year. This is a short term bounce and then fade the rally type of setup that I take advantage of this time of year, every year, and normally do fairly well with.
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