By:Christopher Lewis
Oct 23, 2023
Synopsis
Natural gas prices drop due to rising US temperatures. The "Indian Summer" is affecting prices, but there's historical support. Long-term demand will likely drive a market rally. Watch the 200-Day EMA for resistance. A cautious, non-leveraged approach is recommended. Doubling profits is possible with seasonal trends. European Union supply shortages and colder temperatures could also boost prices. Patience is essential for this market.
Natural gas markets have drifted a little bit lower during the trading session on Monday, as we continue to see temperatures rise in the United States.
Natural Gas Technical Analysis
So-called “Indian Summer” has arrived in the United States, pushing temperatures warmer for the next week or 2, and this has shown itself in pricing when it comes to natural gas. This makes a certain amount of sense, but we are also near an area that previously has seen quite a bit of support, so it does make a certain amount of sense that buyers will be lurking underneath. Furthermore, from a longer-term standpoint the natural gas markets will see a lot of demand coming back into the picture, so it does make quite a bit of sense that we will see this market rally given enough time.
The 200-Day EMA above will end up being a significant target, as well as resistance barrier. If we were to break above there, that should bring in more momentum, and therefore I think we have a scenario where the market is simply killing some time before we see the longer-term momentum pickup and push natural gas prices much higher. Remember, I have been advocating for an investment and not a short-term trade, so being cautious about the position sizing is crucial. In fact, I do not have leverage in my position, and I have been using an ETF to do so. Ultimately, I think this is a situation where you need to be cautious, but doubling your money would be a real possibility if the market were to follow its seasonal trajectory.
All things being equal, I have no interest in shorting this market, and I do think that given enough time it’s likely that the lack of supply in the European Union and of course colder temperatures will both come into the picture to push the market to the upside. This is a seasonal trade, and will of course be pushed by the idea that the Russian natural gas is off-line, and of course there is a serious lack of supply coming from other places as well. With all of this, it’s only a matter of time before the market starts rising, so a certain amount of patience will be needed.
Source: https://www.fxempire.com/
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