- Natural gas markets made an initial attempt at rallying during Friday's trading session but ultimately relinquished those gains as they continued to hug the lower boundary of the recent consolidation range.
- This ongoing pattern suggests that the market is poised for continued oscillation, primarily around the critical $3.00 level in the futures market, which remains an area of significant interest.
A potential game-changer lies in the scenario where the market manages to break above the upper limit of the current candlestick formation. Such a move could potentially open the door to a trajectory that leads to the 200-Day Exponential Moving Average. I do think this will happen – eventually. Therefore I don’t have overly levered positions in this market, but of its inherent volatility, especially now that the world is slowing down.
However, there is also the looming threat of a breakdown below the pivotal $3.00 level, which could result in a substantial market decline. Nevertheless, this outcome appears less likely, given the seasonal demand increase that typically occurs during this time of year. Additionally, the shortage of natural gas in the European Union this winter is expected to exert upward pressure on this market.
Traders Should be Cautious
Personally, I have not leveraged my position but rather opted for participation through the ETF market. This strategy allows me to ride out the significant swings that tend to characterize this season. In the event of the next upswing, my initial target is set at the $4.00 level. Beyond that point, the market's momentum will dictate whether we could see further upward movement, which, based on structural and technical analysis, might extend towards the $5.00 level in the foreseeable future. Historically, the $5.00 level has been a focal point for price action, making it a potential milestone on the horizon.
At the end of the day, while it is tempting to consider entering the natural gas market on each dip, exercising caution and not committing to substantial positions immediately is advisable. This investment should be viewed through a long-term lens, given the cyclical nature of the market. It is more akin to an investment opportunity rather than a short-term trading proposition. In other words, don’t go crazy in this market, as it is so tied to short-term fluctuations, and natural gas tends to be very difficult for retail traders to time.
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