Natural Gas Forecast December 5, 2012, Technical Analysis
The natural gas markets initially tried to rally on Tuesday, but were push back at the $3.60 level in order to form a shooting star for the session. With warmer than normal temperatures in the northeastern part of United States, the demand simply will not be there for natural gas in the short-term. We think that the area just below is significant support, but the fact that we have formed a shooting star just above certainly would make buyers nervous.
Looking forward, if we managed to clear the $3.40 level, we think this market could fall apart. We would certainly see a run down to the $3.00 level in the short-term. Alternately though, we could see a bit of support in this general vicinity that could form and send the market higher. However, we do have to admit that recently this market has not acted healthy at all. Because of this, we are going to be very careful with any long positions we initiate in the near-term.
Your capital is at risk
Another possibility is that hedge funds are starting to liquidate their winning positions now we’re getting close to the end of the year. This happens quite a bit in the commodities markets, and is presently being seen in the gold pits. It’s not necessarily whether or not they want to own gold, but rather they need to book profits before the end of the year to report to their clients that they are in fact wealthier.
The natural gas markets did have a significant break out at the $3.00 level previously, and we do think that it meant a serious pullback in the overall downtrend. We still think that the market could reach the $4.50 level before the end of the New England winter, but we understand that in these volatile times, we may run into a situation where traders feel like they need to sell anything remotely profitable, and head for the hills so to speak. Because of this, we think that the volatility will continue, but the Tuesday candle really starts to spark her interest as we think we could have the beginnings of a significant fall. Again though, we think by the end of the winter we will have a significant bounce as well.