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It’s important to acknowledge the market’s current overbought condition.
- In Wednesday’s trading session, natural gas markets exhibited a minor pullback, despite being comfortably above the 200-Day Exponential Moving Average.
- It appears that the market may have experienced a slight overextension.
- Personally, I see this as an opportunity to enter the market, as I have been steadily building a position over the past few months.
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The critical support level to watch is the $3.00 mark, which is expected to play a significant role. This level has historical importance, driven by “market memory” and potentially structural factors contributing to its strength. Additionally, the 50-Day EMA is situated in close proximity and is on an upward trajectory, signaling potential support in that region. Consequently, pullbacks in the current context present attractive buying opportunities.
On the upside, a breakout above recent highs could pave the way for natural gas to test the $4.00 level, and possibly even eye the $5.00 level in the foreseeable future. Several factors contribute to this bullish outlook. Firstly, approaching colder temperatures typically trigger a cyclical trade, driving increased demand for natural gas. Furthermore, this year presents an additional catalyst in the form of uncertainty surrounding the supply route for natural gas to reach the European Union, which is expected to face substantial challenges. With Europe likely to rely on importing Liquefied Natural Gas from the USA, the US contract is poised for a significant uptrend.
It’s important to acknowledge the market’s current overbought condition. Therefore, a prudent approach involves patiently waiting for opportunities to buy on the dips, capitalizing on potential value in the market. After all, there are a lot of reasons to think about buying this time of year, and the continued lack of supply that continues to get worse makes this one of my favorite investments in Q4 this year. I suspect that we will eventually get a spike higher in price, and therefore should be profitable if you are patient.
In conclusion, the natural gas market demonstrates resilience and potential for further growth. The $3.00 support level, coupled with the supportive 50-Day EMA, strengthens the case for buying on pullbacks. With colder weather approaching and supply uncertainties in Europe, the outlook for natural gas remains bullish. While an overbought condition exists, traders should remain vigilant for favorable entry points, recognizing the potential for continued upward momentum in the longer term.
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