Tuesday’s trading session witnessed a slight decline in natural gas prices, following Monday’s reversal of gains. Frankly, this is a market that has not yet found its direction, therefore I believe you should continue to search for opportunities to sell on rallies. Frankly, I was surprised that we couldn’t even maintain rallies for a few days. One would assume that we would continue to rally sooner or later, but I suppose we need a catalyst to make that happen.
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The fact that the February contract is already being traded encourages me to believe that the general bearish trend may continue. This is especially true given that the market has been overbought for so long, and it is likely that people will now oversell the asset. As a result of a winter storm, the markets will most certainly experience an uptick, but this will likely be the “final hurrah” for that gas in general.
Based on this chart, I believe that the $5.00 level is likely worth monitoring, since it is a huge, round, psychologically significant number and an area where I would anticipate sellers to return. I’d love to see a rebound in that area, but we don’t even have that kind of momentum right now. I would consider the level of the 50-day exponential moving average (EMA) above $5.63 to represent the overall “ceiling.” Regardless, I believe that this market must determine where the purchasers will finally appear.
