Natural gas markets have done very little during the Thursday trading session, while it looks as if we are simply going to see the market hang around and test the 50-Day EMA. The 50-Day EMA is an indicator that a lot of people pay close attention to, and it is going flat. All things being equal, the market looks as if it is range bound, and the fact that we are in the midst of the summer suggests that we will probably continue to see a lot of back and forth. Alternatively, the time of year is typically somewhat poor for natural gas, due to the fact that heating demand will be almost nonexistent.
Expect Choppiness and Noisy Behavior
That being said, it’s likely that we will continue to see a lot of noisy behavior, mainly because the Europeans will have to replenish their natural gas stocks to make sure that they have enough power and heating through the winter. Remember, as long as Russia is a pariah in the European Union, the Europeans will have a major issue when it comes to natural gas. Furthermore, the Europeans took the brilliant step of closing down the Groningen gas fields, making the situation even worse for themselves.
We have been trading between the $3.00 level above and the $2.00 level underneath, and I think that is essentially the “summer range.” I do think that we are in the midst of building up some type of accumulation phase, therefore a short-term pullback makes quite a bit of sense, and I think ultimately we have a situation where the market probably will continue to see plenty of buyers every time it makes a little bit of a dip.
All of this being said, be careful about position sizing, as the markets will continue to see a lot of questions. The natural gas markets are in the midst of a “summer range”, and the market is prone to these times. However, as the EU will have to refill its tanks, there will be a certain amount of buying pressure under current levels.
Potential Signal
- Natural gas has essentially bottomed out at this point, and it is likely to be one of the biggest trades in the second half of 2023.
- On a move to $2.50, I will be “scaling into a position”, with the understanding that the market has to build up confidence.
- As long as it stays above $2, its likely that we will find buyers.
- A target is at least $4.
Ready to trade Natural Gas Forex? We’ve made a list of the best commodity broker platforms worth trading with.