Natural gas markets initially rallied during the trading session on Wednesday but gave back the gains rather quickly to form a bit of a shooting star. That being said, we are still very much in a consolidation area, so I think that the market is going to continue to see a lot of back and forth, as we try to figure out what is going on next with the weather patterns and the United States. After all, the heat wave in the west continues to drive up demand for natural gas to cool homes, but the markets have also taken off to the upside far too quickly.
NATGAS Video 15.07.21
When you look at this chart, you can make out a significant bullish flag, and therefore traders will be looking for some type of potential break out to go to the upside. The $3.80 level is an area that has obviously been a significant barrier, and the bullish flag measures for a move to the $4.40 level. Beyond that, the previous consolidation area that we had recently broken out of also measured for a move to the $4.40 level. With that being the case, this remains a very bullish market.
However, if we were to turn around a break down below the $3.40 level, it is likely that the market would break down. Furthermore, the 50 day EMA is right in that same neighborhood as well, so it will add even more important on the $3.40 handle. Breaking down below there would change everything, but right now it certainly looks as if the buyers still looking to come in and pick up dips as value.
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