The Natural Gas market has gapped higher during Monday's trading session, which indicates that it's trying to find the top of a range. There are a few candidates above that could be at the top of that range, so traders need to pay attention to multiple places.
While the market may not be bullish on natural gas right now, it's essential to recognize that eventually, bottom pickers will come back into the market to try and lift the natural gas markets. The 50-Day EMA is worth paying attention to, which sits just below the $2.60 level. The $3.00 level is also a psychologically significant level, and it's an area where selling pressure has previously occurred. Therefore, it does make sense that the market is trying to work out this range, which could possibly be between the $2.00 level and the $3.00 level. This range is close to the typical range during the summer months in the northern hemisphere when demand is typically much lower than during winter.
It's essential to pay attention to the fact that the Europeans will eventually have to refill their tanks as they head into winter. While this isn't happening anytime soon, probably a few months down the road, it's still an important factor to consider when trading natural gas. It's a situation where traders are trying to figure out what the overall basing pattern will be for the next move to the upside.
Be Cautious
- While it's expected that the market will eventually break above the $3.00 level and make a much bigger move, it's more likely that this will occur closer to the September contract. In the short term, traders may have a nice opportunity to go long, but just for a short-term trade.
- At the first signs of exhaustion after a rally, traders should be willing to start selling this market again.
- Natural gas is abundant, and it's not manipulated by a cartel like OPEC does in the crude oil market, so signs of exhaustion after a short-term rally are much easier to spot.
At the end of the day, the Natural Gas market is trying to find the top of a range, and traders need to pay attention to the multiple candidates above. While it may not be bullish on natural gas right now, eventually, bottom pickers will come back into the market to try and lift it. It's important to pay attention to the typical range during the summer months and the fact that Europeans will eventually need to refill their tanks as winter approaches. While a bigger move is expected, traders should be cautious and patient and wait for the right opportunities to present themselves.
Ready to trade FX Natural Gas? We’ve shortlisted the best commodity trading brokers in the industry for you.