Natural gas markets displayed some resilience during Tuesday’s trading session, as prices continue to hover around $7.75. This is a region that has been significant on several occasions, so it makes natural that we would observe a slight increase in this general area. I believe it is more probable than not that we will observe a great deal of erratic activity, but I believe it is only a matter of time before sellers return to the market.
However, the natural gas markets have been an unmitigated nightmare of extreme volatility during the entire year, so I do not know why things will improve suddenly. We have established a head and shoulders pattern, and it appears that the market is attempting to break down. If we break below the bottom of the hammer from the previous session, it would be a very unfavorable development, maybe resulting in a natural gas price of $7. Currently, rallies are likely to struggle with the 50-day exponential moving average (EMA) and the $9 level.
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The 200-Day EMA is currently at $6.82 and climbing. I believe we will eventually find purchasers in this area as well, but it will likely take considerable effort to get there. Ultimately, I believe that we have no real reason to believe that the market will immediately move in one direction, but I do believe that there will be a little something for everyone.