The upside isn’t necessarily infinite, but certainly could be used against the market, offering more runway for shorts on rallies, something that you would need.
- Natural gas markets have been trading sideways just above the $2.00 level, showing little sign of significant movement in either direction.
- This level is of particular interest during the warmer months, as demand tends to drop, leading to a more subdued market.
- The current range appears to be between $2 and $3 levels, with the 50-Day EMA dropping and sitting around the $2.71 level.
- Despite the market appears to be in a downtrend, the noise is likely to persist.
The attitude of the market towards a "fade the rally" type is likely to continue as temperatures increase in the northern hemisphere, leading to a drop in heating demand. As we are nowhere near the hot season, air conditioning demand is unlikely to be a factor. Additionally, the market must keep a close eye on industrial demand, which is likely to have taken a hit in light of the global recession. Consequently, the demand for natural gas is unlikely to pick up anytime soon. This environment suggests that the $3 level will be a significant resistance barrier, and even if the price breaks above it, sellers are likely to return sooner rather than later.
The market Will Continue to be Relatively Quiet
A significant wick to the upside would likely signal an opportunity to start shorting the market, particularly if it breaks down below the $2.00 level. In this case, a drop-down to the $1.80 level, which has shown previous noise, is possible. However, it may not be wise to sell in this area, as the market may have reached a point where it is challenging to find willing sellers. After all, nothing lasts forever. The market could fall from here, but the downside has become extremely limited. The upside isn’t necessarily infinite, but certainly could be used against the market, offering more runway for shorts on rallies, something that you would need.
Overall, it seems that the market will continue to be relatively quiet, as traders await more significant signals. The industrial demand for natural gas is a crucial factor to keep an eye on, and the global recession may be the defining factor in this market's future. With little bullish movement in sight, buyers are likely to be cautious, while the market may continue to see more of a "fade the rally" attitude in the coming weeks.