The natural gas markets rose during the session on Tuesday as the floor at $2.20 continues to support the market. The area may have attracted value investors as the market dipped to ten year lows. However, the other and more important possibility is that the bears have simply been taking profits for the session.
The resulting candle for the day is a hammer, and this shows that we may see a bit of a bounce from this point. This has us interested in selling on signs of weakness as there is absolutely no real suggestion of a potential trend reversal, and the warming weather in the United States certainly won't help prices either. The spring is almost here, and as a result the gas usage by the general public will decline. The industrial use will be by far the main driver of pricing in the near term.
The economy in the US does seem to be picking up, but it is still fairly weak, and as such we aren't looking for a massive amount of demand to suddenly enter the market. The supply of natural gas in the US alone continues to be massive, and with new discoveries on an almost daily basis, there is no shortage of natural gas in the foreseeable future.
The $2.20 level looks as if it is a last stand of sorts by the bulls, and one can also make a case for levels at every 20 cents in this pair going all the way to roughly $3.20 or so. This allows for easy plotting of support and resistance in this market. It is because of this that we are looking to sell this market on weak candles in intervals of 20 cents. We think that a bounce is long overdue, and welcome it as a way to sell at higher prices as the trend certainly isn't changing, and the demand picture will only get worse in the United States, which is the largest consumer of natural gas in the world. With all of this in mind, we simply wait to see a weak closing candle on the daily chart at one of our 20 levels to sell again.
Natural Gas Forecast March 14, 2012, Technical Analysis
Natural Gas Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3