Natural gas markets have been rather noisy during the trading sessions making up this past week, reaching down towards the 200 week EMA before turning around to form a bit of a hammer shaped candlestick. This does not mean that the market is necessarily ready to take off to the upside, but it clearly has a proclivity to gain. Because of this, I like the idea of buying dips and of course this lines up quite nicely with the time of year as more demand for natural gas is typically the norm. With that in mind, the market is likely to be a “buy on the dips” scenario, but I think that eventually we will try to break above the $3.00 level.
NATGAS Video 19.10.20
Breaking above the $3.00 level, then we would be looking at a potential move towards the $3.25 level, possibly even followed by the $3.50 level. I do not like the idea of shorting this market, at least not this time of year. There is a lot of noise underneath and of course that means that there is a lot of order flow. That order flow gives the opportunity for traders to take advantage of liquidity, thereby buying more contracts.
If we were to break down below the $2.40 level, then we may have to “reset” closer to the 50 week EMA, and of course the psychologically important $2.00 level. All things being equal though, between the hurricanes in the threats to supply disruption, we have had a nice little rise higher and what typically would be the case anyway. I believe buying dips should continue to work.
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