Natural Gas Price Outlook – Natural Gas Continues to Rally

Natural Gas Technical Analysis

The natural gas market has rallied a bit during the early hours on Tuesday as we continue to see a sharp recovery. My analysis of natural gas from a longer term standpoint has not changed whatsoever, despite the fact that this has been a fairly impressive bounce. We are above the 200 day EMA, but we are below the crucial $3.50 level and of course the trend line that has been so important for so long. At this juncture, it looks very much like a market that is trying to test what had previously been support via the uptrend line. So, when I look at this, I’ll be watching to see whether or not we have any signs of exhaustion.

Exhaustion is something that I would be looking to jump on as a short selling opportunity. I suspect somewhere between this trend line that we had broken below, and the $3.50 level, we probably see some type of technical resistance. The 50 day EMA sits just above there as well. And therefore, I think there’s a lot going on to keep getting bullish at this point. Signs of exhaustion again, I think, are selling opportunities.

Keep in mind that this time of year demand for heating drops drastically and therefore natural gas gets hit. There are concerns right now about inflation and that could cause commodities to really go to the upside at this point as inflation makes commodities more expensive typically, but at the same time demand for natural gas could be wanting. The Europeans seem like they’re okay at the moment. And of course, the Americans won’t be heating their homes and if we get a recession, especially in the United States, demand for electricity could drop.

And if that’s the case, natural gas use will drop as well. This time of year is cyclically very poor for natural gas under normal circumstances. So as a general rule, I don’t buy natural gas in the spring or summer, at least not until temperatures skyrocket in America. This is an area of inflection and therefore I think this is something worth watching for signs that we could start selling off again.

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