Monday’s trading session on the natural gas market was rather quiet, as prices hovered just below the 50-day exponential moving average (EMA). As a result, it appears as if the market is building a bearish pennant, which indicates that prices will likely decline. In this instance, the “measured move” is to the 200-day exponential moving average (EMA) right below the $7.00 mark.
It will be interesting to see how this plays out, as it appears that we are on the verge of breaking down. However, there have been numerous attempts to break down the natural gas markets in the past, so you should be very flexible with your positioning, as it appears that the markets will continue to be extraordinarily volatile. Keep in mind that there is a great deal of external pressure as a result of the crisis in Ukraine, but there is also talk about how much storage the Europeans have been able to acquire.
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In actuality, the Chinese purchase natural gas from the Russians and resell it to the Europeans. It’s all a shell game, so there may come a moment when people start to focus on that, leading to a decline in impulsive purchases. In any case, if we break below the lows of the previous several sessions and the $7.50 mark, the bottom might fall out quite rapidly. In contrast, if we reverse a break above the 50-day exponential moving average, we will likely return the $9 area.
