The natural gas markets have broken out during the last couple of days to break above the $3.40 level, which of course is an area that has been crucial resistance multiple times in the past. Breaking above that level also represents that the market is breaking out of a major resistance level and consolidation area. The consolidation area measures for a move of $1.00 suggesting that we could go as high as $4.40 above. All things being equal, this is a market that I think continues to see a lot of volatility but given enough time I do think that we are at the very least going to go looking towards the $4.00 level above.

NATGAS Video 28.06.21

At this point in time, the market probably has a significant amount of support underneath, especially as the 50 day EMA is sitting just above the $3.00 level, which is an area that is important as well. We are clearly accelerating to the upside so now that we are in an impulsive stage, which means that the gains could come rather rapidly. With that in mind, the market is likely going to continue to see a lot of momentum jumping into the picture, so I think at this point if we do get a certain amount of a pullback, it will be limited at best.

With the heatwave out west, it does suggest that we will have more demand in the short term, but from a longer-term standpoint it is obvious that the market is still oversupplied from a structural standpoint, so I think it is only a matter of time before we fall apart. This is as much a “knock on effect” of the commodity boom than anything else and will be the first place we see cracks in it.

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This article was originally posted on FX Empire


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