The natural gas markets attempted to rally this previous week again, but failed as they have over the last month or so. The markets are currently sitting on the $2.70 level, which sets up quite nicely as a technical signal. Once we get below the $2.70 level, we think that this contract will continue much lower at this point in time. In fact, you could make a case for the recent action to be a bearish flag. However, it must be noted that the measurement would have this contract essentially been worthless. We obviously don’t think that.
Nonetheless, we think that a break down below $2.70 necessitates a short position in this obviously bearish market. As for buying this contract, we won’t consider it until we are above the $3.30 level.