Natural gas markets have been very bullish as of late, even breaking above the $3.10 level which of course is a very strong sign. At this point, I think that it’s important to recognize that we have just broken out of an overall consolidation area between $2.95 and the $3.10 level. That’s a very bullish sign, but we are also a bit overextended when it comes to the longer-term range that this market typically trades in. I do think that there are a lot of things lining up at the same time that could be bullish for natural gas, not the least of which we are starting to trade contracts in the futures markets that focus on the coldest part of the year for the United States, and this seasonality is something that’s well-documented. Keep in mind that the short-term pullbacks should be short-term buying opportunities, and therefore it’s going to be a bit difficult to short this market anytime soon.
I think at this point, it’s likely that the buyers will return multiple times, and it does look like the $3.10 level should be supportive. If we break down below there, then we could fall as low as $2.95 where we would see more buyers coming back. On the upside, I believe that every $0.05 level will continue to be reactive in the market, so short-term trading is probably as good as it gets over the next couple of months. If we were to turn around and break down below the $2.95 level, then I think we could break down rather significantly.