Natural Outlook – Natural Gas Jumps Higher on Thursday

Natural Gas Technical Analysis

The natural gas markets have gapped a little bit higher during the trading session on Thursday at the open. And it looks like the market is trying to do everything it can to price in the idea of colder temperatures. But really, this is a scenario where traders need to look at this through the prism of how much further can we go? And I don’t mean as far as distance, but I mean time. We are getting to that time of year where natural gas is going to suddenly get cheaper and that’s because demand’s going to fall off of a cliff.

In the short term, maybe you can make a few small trades to the upside, but I’m really watching this area between $3.50 and $4 for signs of extreme exhaustion, a long wick to the upside if you will, before I start shorting. Quite frankly, natural gas is so cyclical that I only place a handful of trades here and there, and I’ve already placed my long trades for the winter. It’s not that you can’t make money here, it’s just that you’re getting to the point of the year where it becomes less likely to stick to the upside.

We are in the March contract, and here in about ten days, we switch over to the April contract. That is going to matter. Yes, we will still deplete the current storage, but it won’t take long to refill it, especially when you don’t have to worry about the ground being frozen or anything like that. You can just pile into storage pretty much as much gas as you want. So, at this point, we are getting closer to the end of the winter rally. I’m more or less looking for signs of weakness to take advantage of, although I haven’t seen it yet. It’s a matter of being patient.

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