- During the trading session on Wednesday, my analysis of commodities has brought my attention to the natural gas market, as we fell rather hard, only to turn around and show signs of life.
- The market is likely to continue to see a lot of support near the $2.80 level, as we have seen buyers defend that level III days in a row. All things being equal, even if we break down below there, it’s likely that we will continue to see a lot of support underneath, near the $2.70 level.
- Furthermore, we also have the 50 Day EMA sitting just around the $2.70 level, thereby offering a bit more in the way of technical support.
Seasonality
Keep in mind that natural gas is a very seasonal market at times, as market participants continue to see a lot of upward momentum due to the idea that temperatures will be dropping in the northeastern part of the United States, thereby driving up a lot of demand for home heating, and of course overall energy production. In a sense, you can get an idea as to what electricity demand might be as well, as quite a bit of electricity in the United States is actually produced by natural gas consumption.
Top Forex Brokers
Regardless, as we head toward the winter in the northern part of the world, a lot of the developed economies will be demanding more and more natural gas. Keep in mind that the futures market is generally a couple of months ahead, and therefore we are looking at the possibility of whether or not winter is going to be aggressively bullish or not. After all, this is a market that tends to move on weather. Anybody who lives in the northeastern part of the United States can tell you just how unpredictable the weather can be, so therefore this tends to be a very volatile market.
As things stand right now, it looks like a “buy on the dips” type of situation, at least until something changes drastically, or we get warmer temperatures in the futures markets. All things being equal, I do think that you get a lot of volatility, but in the short term at least, I think that you are looking to buy dips.
Ready to trade daily Forex analysis? We’ve made a list of the best commodity broker platforms worth trading with.