- Natural gas initially fell a bit during the trading session here on Thursday but then turned around to rally.
- I think we are a little oversold. So, a bit of a bounce does make a certain amount of sense, but really at this point in time, I'm looking for a reason to get short yet again.
- I'm very interested in the $3 area. And if we can get a bounce from here.
I am more than willing to start shorting at the first signs of exhaustion. On the other hand, if we break down below the lows of the last couple of days, then I think the market could go looking at the $2.50 level. Ultimately, you have to keep in mind that the overall attitude of the markets during this time of year is typically very poor anyways, because unless we have some type of massive heat wave, natural gas demand tends to slip.
Heat Wave Might Help?
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That being said, if we get another heat wave, then the demand for electricity could pick up. Remember, this is a US contract, so this winter might be interesting as the Europeans are set to buy more US energy. One would assume, that liquefied natural gas is a major part of that. All things being equal though, we are a little bit far from that time when we started to price in winter demand, and therefore there's really no reason to think that natural gas is going to be strong. Again, I think if you just simply wait for signs of exhaustion after a short-term rally, you'll get an opportunity to short this market at a better entry price. I like $3, but I also recognize we could go as high as $3.20 and still set up for a nice short-term selling opportunity. I have no interest whatsoever without some type of major external factor in buying natural gas anytime soon.
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