- Natural gas markets displayed remarkable strength during Tuesday's trading session, setting the stage for potential further gains in the coming days.
- Despite a period of consolidation and oscillation, several compelling factors suggest an upward trajectory in the intermediate term.
- In fact, we may eventually see a huge upward trajectory in this market. In fact, I am trading this market accordingly. The thing is that the ability to hang onto the market in the process.
One pivotal driver behind this bullish sentiment is the imminent demand for natural gas within the European Union, as winter approaches. Heating homes and powering businesses will necessitate the import of liquefied natural gas (LNG), with the United States poised to play a significant role in meeting these requirements. It's important to note that most natural gas contracts are based on the Henry Hub contract, originating from Henry, Louisiana, signifying that it's U.S. natural gas at the forefront of this dynamic.
The 50-day Exponential Moving Average provides some support, but the true support level appears closer to the $2.50 mark. While a breakdown below this level would be surprising, it could serve as an opportunity for further buying. This is due to a confluence of factors, including the European demand surge, natural gas availability issues, and the cyclical nature of the market. Although there is more natural gas than before, it's insufficient to fill the void created by Russia's reduced gas supply to the EU. Furthermore, questions linger about the trans-African pipelines in West Africa, following recent coups d'états in the region.
Traders Should Remain Attentive
Considering these dynamics and the market's inherent cyclical nature, there seems to be a strong case for an eventual breakout to the upside. Once the $3.00 level is breached, it opens the door to the possibility of a move towards the $5.00 level. For those unable to access the ETF market, scaling into a Contract for Difference position represents a sensible alternative.
In the end, the natural gas market is primed for upward momentum, driven by growing demand in the European Union and a range of supply-related concerns. The support levels and the cyclical nature of the market suggest an optimistic outlook, with the potential for significant gains in the foreseeable future. Traders should remain attentive to developments and consider investment strategies that align with the evolving dynamics of the natural gas market.
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