For the short term, keep in mind that liquidity is going to be a major issue but clearly you cannot be a buyer of natural gas anytime soon.
Natural gas markets rallied initially on Wednesday but failed at the 200-day EMA. Because of this, we ended up forming a bit of a shooting star and it now suggests that we are going to continue to go back and forth in the same range that we have been in for some time. The $3.50 level seems to be supportive, and the 200-day EMA offers plenty of resistance.
Keep in mind that the natural gas markets have been very noisy as of late, especially as we continue to see warmer temperatures in the United States work against the value of the contract. Keep in mind that unlike Europe, the United States is oversupply of natural gas, and the fact that the winter has not been that cold certainly adds more downward pressure to pricing. When we had recently spiked in this contract, some people thought it had to do with the nonsense going on in Europe, but the reality is we were still playing catch up from the hurricane and the flooding issues. Now that we are beyond that and temperatures are unseasonably warm, it drives down demand quite drastically.
At this point in time, I like selling short-term rallies that show signs of exhaustion in order to take advantage of an obvious trend, and perhaps aim towards the $3.00 level. That is the “measured move” from the descending triangle we broke out of, and it is also an area where this market has been very comfortable hanging about multiple times in the past. Because of this, I am fairly confident that we will get there. I will ignore rallies and simply look for signs of exhaustion that I can take advantage of, as we are far too far into the season to think that w'ere suddenly going to have a good winter. For the short term, keep in mind that liquidity is going to be a major issue but clearly you cannot be a buyer of natural gas anytime soon. As we are already trading the February contract, I find it difficult to believe that we are going to see some type of massive rally for any significant amount of time in the near term. In fact, natural gas looks absolutely horrible at this point.