Natural gas markets tried to rally during the trading session on Monday but found enough resistance at the $2.75 level to turn around and fall significantly. However, I think that we will eventually break out to the upside simply because we are so oversold. It’s not necessarily that I want to own natural gas, but I think that the relief rally is basically needed at this point, because we have been so sold off as of late. I think at this point it’s very likely that we will continue to see a bearish pressure on natural gas, but the bounce back makes quite a bit of sense, because the $2.50 level underneath is massive support.
If we were to break down below that level, it would be extraordinarily negative for this market. I don’t think that’s going to happen though, and I believe that it’s only a matter of time before we get some type of massive short covering rally. All it would take is a major cold snap in the right place in the world to drive demand through the roof in a very short amount of time. That being said, it would be short-lived, and as we are escaping the winter months in the United States, that will drive down a lot of demand. Beyond that, we have a lot of concerns about global demand, mainly because we have a potential slowing down of economic activity. That of course will drive down the need for energy consumption. I am bearish, but I would rather see a rally that I can sell from higher levels.
Please let us know what you think in the comments below
This article was originally posted on FX Empire
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