Natural Gas Price Forecast – Natural Gas Continues to See Downward Pressure

Natural Gas Technical Analysis

The natural gas markets have drifted a little bit lower during the early hours on Wednesday as we continue to see a lot of volatility. The market continues its pullback from the $3 level, which of course is a large round psychologically significant figure, and an area where a lot of people will be paying close attention. A breakdown from here opens up the possibility of a move down to the $2.50 level, which is a large round psychologically significant figure, and an area where the 200-day EMA currently resides.

In general, this is a scenario where traders are looking at this through the prism of whether or not they can find any value, which right now, I think we are a bit stretched. There is a cyclical trade here that people pay attention to and that’s when heating demand picks up in the United States. There isn’t a supply issue in the United States and in fact, there probably never will be.

What is not known is how cold it gets and how much demand there will be in the short term. And that’s why this is such a volatile contract because it’s focused on the short term more than anything else. It’s also influenced by the futures markets, which is actually where natural gas is traded, not the CFD markets. So, you are currently trading the forward month, which is going to be focusing on colder weather than we have right now, which is why the price has elevated.

This lasts for a while, and then sometime in the middle of winter, they start pricing in spring, which means less demand and the market rolls over. Yet again, this is a cyclical trade, nothing more, nothing less. At this point in time, if we do pull back, there’s probably value to be had, but it’s not something you go all in on.

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