- In Friday's trading session, natural gas markets embarked on an early rally, only to encounter significant resistance near the $3.00 mark.
- This level has persistently acted as a formidable barrier, reminiscent of a sturdy brick wall, and holds the key to potentially higher price levels.
- Additionally, it's crucial to note that the 200-Day Exponential Moving Average resides in close proximity, further drawing attention from market participants. Consequently, the primary focus revolves around whether we can achieve a breakout.
My approach to this market is grounded in a longer-term investment perspective, primarily involving participation in the ETF market. For those unable to access ETF markets in the United States or other major exchanges, the CFD market offers a viable alternative, allowing for tailored position sizes and risk management.
It's essential to recognize that natural gas is a notably cyclical market most years, and there's little reason to believe this year will be any different. A glance at the chart reveals a substantial barrier just above current level. However, it's crucial to understand that such barriers tend to be surmounted over time, driven by the cyclical nature of the trade and the anticipation of increased natural gas demand in the coming months. Moreover, concerns linger about whether the European Union can secure a supply of natural gas without resorting to the costly liquefied natural gas imports from the United States, upon which many natural gas markets rely.
Be Patient
In this context, short-term pullbacks should be viewed as buying opportunities. While the possibility of a move toward the $5.00 level exists, it's important to emphasize that this is a longer-term projection, not an immediate expectation. Patience is likely to be an asset in navigating this market, particularly considering the prolonged accumulation phase we've witnessed. The only question seems to be “When”, not “If.”
In conclusion, natural gas markets face a formidable barrier at the $3.00 level, with the 200-Day EMA providing additional resistance. However, the cyclicality of the trade and the prospect of heightened demand for natural gas in the coming months suggest that this barrier may ultimately yield. Investors should maintain a longer-term perspective and remain vigilant for potential buying opportunities during short-term pullbacks, recognizing that patience may be the key to success in this dynamic and cyclical market.
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