- The natural gas market has seen a bit of a rally in recent days, with prices hovering around the $2.00 level.
- However, this area has been marked by a lot of noise and volatility, with the market struggling to find direction.
- While there may be some support at the $2.00 level, it is unlikely that we will see any significant upside soon.
Looking ahead, there are several factors that suggest the market will continue to be hesitant. Firstly, with warmer temperatures, the demand for natural gas is likely to drop. Furthermore, the global demand for natural gas from an industrial perspective is also weak, which is likely to keep prices in check.
Given these factors, any rally at this point should be viewed as a “bear market rally”. This means that while there may be some short-term upside, it is likely that prices will continue to be volatile and fluctuate between support and resistance levels. As such, traders and investors should be wary of buying into any rally, as it may not be sustainable. After all, there are too many things out there working against the idea of higher pricing. Furthermore, there’s a lot of uncertainty in general, so all things being equal, I think most risky markets, natural gas will suffer at the hands of risk aversion.
Remain Cautious
In terms of technical analysis, the 50-Day EMA is currently sitting around the $2.81 level, which is a key area of resistance. If prices manage to break above this level, then the $3.00 level will be the next psychological barrier to overcome. However, given the weak fundamentals, it is unlikely that we will see prices sustainably break above these levels.
Ultimately, the natural gas market is oversold at this point, which means that any short positions may require a bit of a bounce to get a reasonable return. However, traders and investors should remain cautious and wait for signs of exhaustion before opening any new positions. If prices do break below the $2.00 level, then it is likely that we will see a further drop toward the $1.80 level. Ultimately, there should be plenty of buyers if we do break down through there because quite frankly, there aren’t that many people left to sell at this point. On the other hand, a bullish market is a lot to ask of natural gas.
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