• The natural gas markets initially pulled back just a bit during the trading session on Thursday, reaching the $2.15 level before turning around and showing signs of life.
• Ultimately, this is a market that I think is just simply going sideways using the $2.20 level as a bit of a consolidation level or a magnet for price.
• If we can break higher and get above the 50 day EMA, then I think the natural gas market could go looking to the $2.40 level, roughly meeting up with the 200 day EMA.
• On the other hand, if we do break down below the $2.13 region, then it opens up a move back to the $2 level.
   

Large Round Figure

The $2 level of course will attract a lot of attention from a psychology standpoint, but it's probably worth noting that the later we get into the summer, the more likely traders are going to be focusing on autumn and winter. In wintertime, the demand will pick up obviously, and traders will be looking at this through a prism of demand.

Once demand really starts to pick up, you'll see a spike, as you typically do every winter and then they'll be willing to close out their positions. Because of this, if you can hang on to a small position or an ETF like I do in the United States, you don't have to worry about the leverage and you just simply collect your profits later. I don't like the idea of putting a lot of leverage into this market right now, because quite frankly, there are far too many cross currents and really lack of volume in most markets this time of year to get overly aggressive.

(Click on image to enlarge)

Ultimately, this is a market that is going to continue to be very weak over the longer term, due to the fact that natural gas is so abundant you can find it in the drinking water in the United States in multiple states. However, it is a very cyclical market, and that’s what you will have to be very cautious about jumping in with a huge position.

More By This Author: