The natural gas markets have maintained the negative setup from Monday’s session; hence, a potential breakdown is expected to continue. It does not necessarily imply that there will be a big selloff, but a dip near the 50 Day EMA could make sense, given that the indicator is towards the bottom of the overall rising wedge.
However, because there are so many difficulties in the globe at the moment, it is likely that this industry will continue to experience a great deal of disruptive activity. The market must deal with a plethora of concerns, not the least of which will be the Russians intermittently turning off natural gas. This is obviously a circumstance in which it is impossible to trade, as the noise will at times be intolerable. Ultimately, I believe this market will continue to be volatile, therefore the most important thing you can do is maintain a fair position size because, frankly, we have no idea what news story will make headlines next.
In this scenario, it appears as though we still have a ways to go, but I also know that the markets will continue to be rather volatile, therefore the most sensible method to trade this market will likely be through the options market, despite the hefty premiums I anticipate. The $8.00 level should be difficult to surpass, but if it were to be surpassed, the natural gas market may disintegrate. I believe at this time we are more likely to see a simple pullback than anything else.
