The natural gas markets gapped higher at the open on Tuesday, showing signs of strength as colder temperatures have hit the northeastern part of the United States. However, we fell below the $2.75 level, and then filled the gap down at the $2.67 level. The question now is what happens next? If we break down below the $2.62 level, that is an extraordinarily negative sign and should send this market even lower. However, if we bounce from here, we probably go back to the $2.75 level. A break above there could send this market towards the $2.85 level, which is also resistance. In other words, I think it’s better to simply wait for some type of exhaustion that you can sell. This is a market that although we are in the most bullish time of year, simply cannot hang onto gains for any length of time. It is because of this that I think the very first signs of exhaustion should be punished and sold.
I believe that the $2.50 level underneath is massively supportive and essentially the “floor” in the market. If we were to break down below there I would be an extraordinarily negative sign. I think we are much more likely to see rallies occasionally to start selling, then did breakdown below that level. If we were to break above the $2.85 level, I think the market could go as high as $3.10, but that seems to be very unlikely to happen, so I feel much more confidence in the idea of shorting short-term rallies.
NATGAS Video 27.12.17
This article was originally posted on FX Empire