Natural gas markets gapped lower to kick off the week, as the glut of supply continues to be the story here. With this, I am fading rallies.
Natural Gas
Natural gas markets gapped lower to kick off the trading session on Monday as traders continue to look at the massive amount in storage in the United States and compare it to the potential demand. Quite frankly, this time of year, the demand is pretty weak, and it suggests that higher prices are to be looked at with suspicion.
The $3 level above, for me, is going to be a major resistance barrier just waiting to happen, as we continue to see a lot of questions. And the scenario right now is that traders are likely to see a market that fades most rallies. I don't really have a lot of faith in the overall picture for natural gas in the short term, but longer term, we start to focus on things like colder weather in winter months, and we'll start to work our way back from the glut of supply that we have back to a more normalized amount. At that point, you start to look at cold snaps as potential buying opportunities as demand will pick up.
Top Regulated Brokers
Seasonality and Storage Headwinds
That being said, there's also a wild card this winter in the fact that the Europeans may or may not have a sustainable energy supply, as the situation in the Middle East seems to be never-ending. With that being said, I do anticipate that the natural gas market will remain very noisy, and in this environment, I tend to look more to the seasonality of it than anything else.
The seasonality being weak tells me that I'm looking to fade rallies. I wouldn't overcomplicate it at this point. We are a couple of weeks away from trading the October contract, which could give us a little bit of a boost, but right now, I'm not as excited about natural gas, and I think shorting overextensions in short-term moves probably remains the play.
Ready to trade daily Forex forecast? Here’s a list of some of the best commodities brokers to check out.