Natural Gas Price Outlook – Natural Gas Bounces Early on Tuesday

Natural Gas Technical Analysis

The natural gas market has rallied a little bit during the early hours on Tuesday, but we still have a lot to pay close attention to as traders will continue to look at natural gas through the prism of a market that is very seasonal, and therefore, you have to be very cautious with the idea of trying to get too aggressive here because, quite frankly, demand will drop pretty quickly in this environment.

So, with that being the case, I think you have to recognize that we are approaching a pretty significant support area, but we also are in a time of year when demand will drop as temperatures rise in places like the United States. The $3.50 level for me is very important and I will be watching it closely.

The $3.50 level is backed up by not only the psychology of it being a large round psychologically important figure, but also a trend line and, of course, the 200-day EMA sitting just below there. Ultimately, I don’t like the idea of buying natural gas. And if we do rally from here, I’ll be paying close attention to the 50 day EMA, somewhere closer to the $3.90 level, and I will see if there are any signs of exhaustion in that region. That being said, I do think you need to be very cautious.

I think you need to recognize that natural gas is extraordinarily volatile and it’s a little bit different this time around as we head into spring due to the situation with the EU needing gas from Russia or the United States, we’re not sure where it’s coming from yet. And therefore, it is going to continue to be very noisy, but I do think that given enough time, we should see sellers come in and overwhelm this market as it gets a little extended. So being very patient and shorting on signs of exhaustion will be the way I look at this market going forward.

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