Natural gas declines persist due to oversupply. Short-term trading challenging, $2 barrier significant. Value hunting potential, but cautious due to storage issues. $2.50 best value until summer, $1.50 possibly floor for short-term traders. ETF purchase considered for potential doubling by fall.
- The early hours of Thursday saw a decline in the price of natural gas as the penalty for the overabundance of this commodity continues.
- There’s hardly much to get enthusiastic about right now in this market as a seemingly cannot get off its back.
Examining the natural gas market, we find ourselves back where we started talking about natural gas declining. We are down almost nine cents as of this early Thursday morning, and it appears that we are prepared to keep sliding. From a short-term perspective, you simply cannot trade this market to the upside.
Okay, if you’re an investor, you may be able to do that but it’s difficult to get overly aggressive at this point in time as natural gas has burnt most traders more than once this year, myself included. We are undoubtedly in an area where there is a lot of opportunity for value hunting, so you have a point. Currently, I’m not sure if it’s something you can rely on anytime soon. Furthermore, as we approach the season, demand for natural gas will continue to decline due to storage issues as well. Therefore, I believe that at this moment, $2 above remains a significant barrier that will be challenging to overcome.
Naturally, the 20-day EMA above that will act as resistance, followed by the 50-day EMA and, of course, the $2.50 mark. Unless there is a severe heat wave that strikes the United States, I believe that the $2.50 level represents the best value between now and perhaps the middle of the summer. Natural gas has had a disastrous winter, and right now we’re barely scraping the bottom. If you are a short-term trader, you may consider the $1.50 level as a possible floor. There are only so many drillers ready to work at $1.75 an hour, so you also need to keep an eye on drilling numbers.
With that in mind, to be really honest, I believe it still looks really dreadful at this time. Purchasing an ETF would make sense, but I’m not bothered. When your money doubles, which is likely to happen in September or October, you may simply cash out.
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