Natural Gas Price Outlook – Natural Gas Continues to See Buyers on Dips

Natural Gas Technical Analysis

The natural gas markets rallied pretty significantly during the early hours on Wednesday as we continued to recover from the $3 level. The $3 level, of course, is a large round psychologically significant figure that will attract a certain amount of attention due to options traders, previous action in the market, et cetera. So, what I think we’ve got is a situation where the market is just simply trying to reach a critical mass, if you will, of upward momentum to finally break above the $3.40 level.

If and when we do break above the $3.40 level, then I think it opens up the possibility of a move all the way to the $4 level. In general, this is a market where short-term traders continue to see plenty of buyers, and therefore I think every time it drops, you have to be looking at this through the prism of trying to take advantage of cheap gas as it were. Keep in mind this time of year is typically very quiet in the United States. As far as volatility is concerned, you generally just have a one-way trade as traders are starting to get ahead of heating demands in the months of January and February.

Do keep in mind though, if you are trading the CFD, that you are also trading something that is a derivative of the futures market. And what that means is before the winter’s over, they will start to sell, simply because they are focusing perhaps on the middle of spring. But as things stand right now, it looks like we’re forming a bullish flag and the measured move is actually for about 90 cents, which would definitely kick off after a move above $3.40, perhaps sending this market all the way to about $4, $4.10 by the time it’s said and done.

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