- Natural gas markets displayed a modest rally during Wednesday's trading session, heading toward the pivotal 50-Day Exponential Moving Average.
- The 50-Day EMA is a key indicator closely monitored by many traders; hence we can anticipate a significant amount of market volatility around this level.
- However, considering the summer season, we can expect the market range to remain relatively tight, with limited clarity on directional trends. With the global economy in a slowdown phase, demand for natural gas is likely to remain high.
Notably, a number of large investors have started building positions, seemingly in anticipation of a potential shortage in Europe later this year. Given these dynamics, it's plausible that the market will continue to view the $2.00 level as a crucial support zone, possibly extending down to the $1.80 level. Conversely, if the market breaks above the 50-Day EMA, we might see a rally toward the $2.75 level, and potentially even as high as the $3.00 level—a point that is likely to define the upper limit of the overall range. If we do break above there in the near term, it will more likely to be due to a heat wave or sudden surge in demand – leading to another selling opportunity.
The Market is Expected to Fluctuate
In the near term, the market is expected to demonstrate considerable fluctuation, making it suitable for short-term scalping strategies rather than seeking extended moves. As such, traders should view the current market dynamics as opportunities to incrementally build profits in their accounts. These smaller gains not only offer the chance to capitalize on the current market oscillations but also serve to build trading capital in preparation for a larger, longer-term trade that could materialize in the future.
As I anticipate the end of the summer range, traders should bear in mind that a larger upward move is likely a few months away. Therefore, patience will be an essential trait for those targeting this potential trend. In the meantime, traders can continue to leverage the market's short-term volatility, while keeping a close eye on the broader market trends and the factors shaping them, such as the looming European natural gas shortage. This dual-focus approach will allow traders to maximize their returns in the present, while also positioning themselves effectively for future market shifts.
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