Natural Gas Price Outlook – Natural Gas Plunges at the Open

Natural Gas Technical Analysis

The natural gas market gapped lower to kick off the session. Now keep in mind, we are rolling over into the March contract in the futures market, and this will have a major influence. And that is because temperatures start to warm up in the United States in March, and it’s already predicted that in this part of the world, which is the only part that matters for natural gas 90% of the time, it is going to be warmer in February than usual, especially as we get later into the month. And March is expected to be somewhat hot by the standards of spring.

So, winter might be over for natural gas. We probably get a little bit of a bounce from here, but at this point in time, I’m starting to shift to downward expectations. The problem with natural gas, of course, is it’s based on weather. And anybody who’s lived in Ohio, Pennsylvania, New York… that area can tell you that the weather changes about every five minutes and that’s why you can’t make money trading natural gas most of the time.

You have to trade cyclicality, and that’s what you’ve been doing for a couple of months now, buying the dips and riding them higher. However, there almost always comes a day, and I don’t know if today is that day but it could be, that thing shifts suddenly. One thing’s for sure, this is a really ugly looking chart, and therefore I don’t really want to be the first person to try to catch a falling knife. I’ll be watching this, but I suspect that if we bounce towards the $3.50 level, we’ll see selling pressure again. And once that’s confirmed, I’ll switch over to shorting for a week or two and then leave it alone.

Natural gas is notoriously slippery to trade and unfortunately for most of the people that I talked to, they live in places like the Middle East, and they don’t understand that this is a US contract that you are looking at here and most CFDs are based on the Henry hub contract, which is a storage facility in Henry, Louisiana. So, the more you know, the more you realize you have to be somewhat specialized in this market. Right now, it looks like winter’s almost over, at least as far as traders are concerned.

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