Natural gas tried to rally significantly on Thursday, but gave back much of the gains before the session was over. The market continues to put up a fight against the selling, but each attempt at a rally continues to produce lackluster results.
The $2.60 level sent the buyers back during the session, and the $2.40 level continued to hold prices up. However, the daily candle was a shooting star, and this shows just how weak this market really is. The demand for natural gas continues to be weak, and the supply strong. Because of this, the market will continue to fall and some analysts are openly calling for prices as low as $1 before the selling stops. With the over 14 trillion cubic feet of known natural gas in the United States alone, natural gas isn't hard to find and will remain cheap going forward.
The recent support at $2.40 should continue to be an area of interest, but if recent history tells us something, it shows that this market will probably continue to the downside, and the trend will remain strong. The recent consolidation will have some worried, but when you look at how fast the markets fell this last 30 days or so, a rest is well-deserved.
The $2.40 should give way, and when it does - the market is a sell again. The breaking above the $2.80 level would be impressive, but we see resistance all the way up to the $3 level, and would be willing to sell weakness between $2.80 and $3 as soon as it shows. The levels should continue to put downward pressure on this market, and we continue to look to it for guidance. The market cannot be bought as each rally continues to disappoint.
We are selling all rallies, and especially at the levels above. A sub-$2.40 print would also have us selling, and a fresh new low could also be a place in which to add to shorts and increase position size as it shows an acceleration of the downtrend by the markets as the trend strengthens.
Natural Gas Forecast February, 10, 2012, Technical Analysis
Natural Gas Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3