By FXEmpire.com
The natural gas markets fell yet again during the Friday session as the $2.20 level has now given way. The fall and speed of this downtrend has truly been something to behold, and it appears that only the foolish dare to buy this market. However, as the market is still above zero, there certainly are people out there that are willing to buy this market – perhaps expecting the inevitable bounce, or even thinking that the market “has fallen too far”. This is analogous to catching a falling knife, but there is almost always someone out there to do exactly that.
There is absolutely no reason to think about buying this market, and all you would need to do is look at the trend over the last year to realize that buying has only brought massive losses for the buyer, and as such we can only trade in one direction – short.
The $2 level seems to be calling, and there is nothing to suggest it isn’t going to be found. In fact, a “one handle” is almost assured at this point. With the massive amounts of natural gas to be found in North America alone, there is little doubt that the US consumption can be taken care of quite easily. In fact, this isn’t a short-term situation, but rather a long-term one. There are present estimates that the US is sitting on over 300 years worth of energy, and this doesn’t take into account Canadian energy as well. In other words – there is a low likelihood that buying natural gas will be anything but a short-term trade for the foreseeable future. Knowing this, it is hard to get involved from the long side, and we find it much more palatable to sell on bounces as the long-term trend is almost certain at this point.
We are happy to sell any all bounces that show signs of weakness, especially those that happen at multiples of 20 cents, which seems to be the pattern in this market. We would also be willing to sell new lows, but fully expect the $2 mark to create a bounce – a bounce we will not hesitate to sell.
Natural Gas Forecast April 2, 2012, Technical Analysis
Originally posted here
