The natural gas markets have been overly bearish for the last year or so, and the trend looks as if it is picking back up again. The supply in the gas markets is far too large for the demand to take it all in, and as such there is little hope of the market rising for any significant amount of time. The increasing concerns over Middle Eastern troubles also has started to kick in the conversation in America about utilizing more of the country's massive 14 trillion cubic feet of natural gas reserves as it is so abundant, cheap, and much more secure than oil supply from places like the Persian Gulf.
Recently, we saw a bit of an attempt to rally this market, and formed a symmetrical triangle. The triangle broke a week ago, and now we use the height of that triangle to project the move down. Based upon that triangle, we are expecting to see natural gas hit the $2 mark before too long, and it is through this prism that we look at the markets for our trades.
The gap down for the session on Monday is a massive signal to sell yet again, even though the market is massively oversold at this point. Of course, in the more near-term, we see the recent consolidation as the rest before the continued fall, and this gap certainly does nothing to dissuade us from selling more. In fact, we will continue to add to the short position until we get to the $2 mark.
The rallies going forward will only add to our positions as it allows us to sell more at a higher price. The market can't be bought as there is simply far too much in the way of bad news for the natural gas markets to rise over time, as the new technologies allow gas drilling in places that previously weren't possible. With this in mind, we are selling any and all rallies and new lows. The gap from the start of Monday should now be resistance as well, as this trend continues.
Natural Gas Forecast March 6, 2012, Technical Analysis
Natural Gas Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3