- The natural gas market experienced a decline during the Thursday session and remained closed on Friday.
- The market closed at the very bottom of the range for Thursday, indicating that people were not interested in holding any risk heading into the weekend.
- This suggests that natural gas markets are ready to go even lower, and we may still not have found the bottom.
However, this doesn’t mean that this is a huge selling opportunity. Shorting something that is already down almost 80% may not be the best trading decision. Instead, it takes a significant amount of patience to wait for a setup that offers a balance. Once we see some type of bounce with an exhaustion candle above, it could be a good opportunity to short the market.
For investors looking to trade natural gas, it’s important to keep in mind the key support and resistance levels. The 50-Day EMA sits near the $2.70 level, which is a significant indicator that a lot of traders pay close attention to. Just above that, we have the $3.00 level, a large, round, psychologically significant figure that could also impact market trends. In fact, the last swing high we had ended up testing that area.
Historical charts show that the area between $2.00 and $3.00 has been the basic warm months’ range, and it looks like we are setting up something similar this year. However, investors need to keep in mind that natural gas prices could experience a significant upside in the future as European countries have not filled their stockpiles sufficiently to avert some type of buying frenzy later this year.
In the short term, investors may need to remain patient and cautious when trading natural gas. It may be challenging to place a lot of trades unless you are a short-term trader or a scalper. Nonetheless, we will eventually get a “bear market bounce,” and when we do, it could be a selling opportunity.
Natural gas prices may continue to experience a decline in the coming weeks. Investors should be patient and wait for a setup that offers balance before making any trading decisions. Keeping an eye on key support and resistance levels can also be helpful in understanding market trends. As we move forward, natural gas prices could experience significant upside potential, but in the short term, investors should remain cautious and avoid rushing into trades.
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