- Early on Wednesday, as we continued to develop a bit of a basing pattern in a market that is clearly oversold, natural gas markets saw a small rally.
- I anticipate that this could continue, but in a limited sense, as there is no real reason for a huge move at this point in time, and this is a market that will continue to see hesitation, so longer-term traders are more adept at dealing with the overall trend building process.
Observing the natural gas markets, we saw a slight rally during Wednesday's trading session, which is probably not a major surprise. At these really low prices, you have to believe that natural gas will struggle a little bit.
The Significance of $1.50
On the longer term chart, the $1.50 level below represents a significant floor in the market, and eventually you have to question if the market can support this kind of pricing. To put it bluntly, drillers will leave the fields, thus one would assume that there would be absolutely no benefit to being involved in natural gas production. We have a significant psychological and structural hurdle at $2, and if we can overcome it, I believe we have a good chance of moving higher.
Having said that, I believe it will require some effort, and please bear in mind that natural gas prices are generally lower at this time of year. It appears to me that traders will continue to view this through the lens of whether they think the worst is over and if they think there is value in it. There are probably two items in particular that require your whole attention.
Temporary declines present purchasing possibilities, in my opinion, but only if you're prepared to endure what may turn out to be an extremely trying few months. I wouldn't expect much more than that from a short-term trader, however you could be able to range trade this using a scalping method. In my opinion, there will be some bargain hunting going forward, but keep in mind that there is also likely to be some short covering there, to put it bluntly. Longer-term charts show that we are unquestionably at an extreme low. Although I believe there will be some volatility, if you keep your leverage low, this could be a swing trade opportunity.
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