Natural Gas Forecast: Rallies Again

• The natural gas market has rallied again during the trading session on Wednesday, as we continue to see a lot of volatility.
• We are currently testing the 50 Day EMA, which obviously will attract a lot of technical traders, and it has, at least so far, offered a bit of resistance that I think traders will watch very closely.
• Ultimately, if we can break above there, it could bring more buyers into the market, at least until we get to the crucial 200 Day EMA.
• The 200 Day EMA currently sits at the $3.26 level, so that I believe would end up being a bit of a “ceiling in the market” as things stand right now.

Seasonality

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One of the most important things you need to learn about natural gas is that it most certainly has a season to it. What I mean by this is that it is the US contract, and therefore it will follow US weather patterns. At this point in time it’s very rare that it gets cold enough for heating to be a major driver of natural gas, which in the winter months most certainly is the case. It’s not necessarily that hot in the United States at the moment either, so producing electricity for air conditioning isn’t really a thought either. Because of this, I think there is still an argument to be made for this market being one that simply has no real reason to get strong at this point, and rallies could end up being selling opportunities.

If we were to break down below the $2.98 level, then I think you’ve would start to see a significant amount of downward pressure come into the picture. In that environment, I anticipate that natural gas could drop to the $2.80 level, perhaps even followed by the $2.60 level. An extraordinarily negative mood could even take natural gas down to the $2.50 level, but I think as we go deeper into the year, that’s less likely. I’m still looking for shorting opportunities and will love this bounce running out of momentum before taking advantage of the overall downtrend.

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