Natural gas markets have fallen a bit during the trading session on Tuesday to reach down towards the $2.85 level before bouncing a bit. Ultimately, the $2.80 level underneath is even more support, not only due to the previous structure, but also the fact that the 50 day EMA is reaching towards. The 50 day EMA certainly has a significant amount of influence built into it, as we have seen the market react to it multiple times.
NATGAS Video 24.02.21
At this point in time, a bounce from here could open up the possibility of a move to the $3 level, which of course is a large, round, psychologically significant figure. At this juncture, I would be a bit surprised if we broke out above there, but even if we did, I would still be looking for selling opportunities as the market is going to start dealing with the warmer temperatures, and of course that will drive down demand. Longer-term, we are going to go looking towards the $2.40 level, possibly even down to the $2.00 level. That does not mean that we get there overnight but given enough time I think we are more than likely going to continue to see sellers jump in and at the first signs of exhaustion.
This is probably going to make a lot of headaches for traders who are over levered, so you need to be somewhat sparing with your position size. Nonetheless, this is a cyclical trade that does tend to work out over the longer term, as this time of year is begun to see traders price and warmer temperatures. In fact, we are already trading the May contract, which of course means that we will not have as much to price and as far as demand is concerned.
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