Natural Gas Forecast October 13, 2014, Technical Analysis
The natural gas markets did almost nothing during the session on Friday, as we continue to bounce along the bottom of the larger consolidation area. The $3.80 level of course has been supportive on this latest consolidation region, and as a result we feel that the market could very well bounce from here and head back towards the $4.10 level. We believe that until the market breaks out of this consolidation area, that’s simply all you can do: play the range back and forth. If we do break down below the $3.80 level though, we could very easily see this market breakdown to be $3.60 level, and then possibly the $3.50 level.
On the other side of the equation, we could see a break out above the $4.20 level with enough bullish momentum comes into play, and as a result we would be very bullish. We think that point time, the market would more than likely head to the $4.50 handle, an area that handles a significant amount of noise and resistance in it. That being the case, the market would be short-term bullish, but would probably continue to have overly bearish pressure in it from the longer-term perspective.
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We believe that a move down to the $3.50 level could be a longer-term bottom though, as there certainly would be value prospecting going on in that general area, and ultimately we feel that longer-term trades could be taken down in that area. The market certainly has a massive amount of bearish pressure in it, mainly because of the supply and demand equation.
After all, North America has an overabundance of natural gas deposits and it, so having said that we feel that no matter what happens we are looking to sell over and over again. Even if we do get that longer-term bounce from the $3.50 level, it will certainly run its course as we continue to have a massive glut in supply. Ultimately, we could go much lower than that, but we anticipate that the $3.50 level could be supportive for several months, meaning that the longer-term traders will continue to sell natural gas, but also recognize that there will be opportunities to the upside after serious breakdowns.