Natural gas has fallen on Tuesday, as the demand season for natural gas has passed us. At this point, I remain bearish of natural gas.
Natural Gas
Natural gas has fallen again during trading on Tuesday as traders continue to price in what is known as the shoulder season, meaning it is between the two major seasons that drive price higher. The first one of course being winter as natural gas is the main component for heating in the United States. On the other hand, the summertime has the occasional heatwave which of course drives up the demand for natural gas to produce electricity.
Ultimately this is a time of year where it's very comfortable and natural gas demand falls off of a cliff in America and therefore, I'm looking for shorting opportunities.
Shorting Opportunities and Market Barriers
This market is near a significant barrier in the form of the 50-day EMA and has dropped from that level and then the 3 level above I think also offers a bit of a ceiling. It is because of this that I think it's time to start shorting natural gas again.
I believe that a move down to the 2.55 level is a very real possibility. This of course is reflective of the fact that there is so much natural gas in the United States and not necessarily going to be influenced at least not as much as most people think by the Middle Eastern situation.
After all the Middle East is mainly supplying Europe and with that being the case although I do think there will be a pretty significant amount of demand coming out of Europe for US natural gas later this year we are not at that point.
And with that being the case I think ultimately this looks a lot like a market that will be sold into anytime there's signs of exhaustion. In fact, as long as we stay below the $3 level I remain extraordinarily bearish.
Potential signal: I am selling here. I would have a target of $2.60, and a stop at $3.02.