Wednesday’s trading session witnessed a substantial increase in the price of natural gas, with early indications pointing to $8.00. At this time, it appears that the market is prepared to rise, maybe hitting the peak of the general consolidation region. Keep in mind that the forward contract is for January, which is obviously a period of year with high natural gas demand.
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Nevertheless, the market is likely a touch overbought at the moment and could use a drop to provide some value. In any market, “chasing the trade” is a wonderful way to lose money, but this is especially true in an extremely volatile market like natural gas. Waiting for a small pullback makes the most sense under these circumstances. I believe the one thing you can bank on is that natural gas will behave like it always has, which is to wildly fluctuate across the charts.
It is also worth noticing that the 50-day exponential moving average (EMA) has reversed direction and is now rising, which suggests that underlying momentum may be building. As you can see, I had previously indicated the probability of a bottoming pattern, and we have now proven this. Currently, it appears that the purchasers are in charge, at least temporarily. Cold weather in the United States has boosted the natural gas markets, which of course benefits the domestic market as well.