By FXEmpire.com

The natural gas markets had a fairly bullish session on Monday as the traders stepped into buy into the massive selloff on Friday. Perhaps many of them thought that the move was overdone, however we don’t feel that this candle on Monday is sufficiently bullish enough to negate the one from Friday.

The $3.00 level still looks very resistive to us, and is a result we are not willing to buy at this point in time. As we mentioned earlier, the $3.10 level look to be the top of the resistance area and as you can see by the candle on Friday, that’s exactly where we stopped. It is because of this that we are not willing to buy it until we see a break above that level.

The supply demand equation in natural gas is still completely skewed towards the supply part of the equation, and there is absolutely no reason to think that this is going to change anytime soon. With this in mind, we don’t want to own natural gas at all. We know that there could be wicked spikes in this market, but we feel that the downtrend is still very much intact and that we perhaps are simply bouncing around in a very strong consolidation area between the $2.20 level, and the $3 level. Because of this, we feel that there will be plenty of shorter-term trading opportunities that could last for several days off of both of these levels.

We are the first to admit that we are more comfortable selling this market than buying it, and Friday may have been a reminder of just how short this market really has been for so long. There’s an old saying that says “never go with the herd”, and this is the type of market that people will look at and think that very thought. However, you must ask yourself this question: “How do the people that bought this market over the last several months at levels like $4, $3.50, or many other levels above here feel about that?”

The path of least resistance is still most decidedly to the downside, and a break of the Friday lows gives us reason to sell yet again. If we do break above the $3.10 level, we feel that this market could rise as high as $3.50 in the short term and could be purchased for a quick trade at that point in time. Otherwise, we remain either flat or short.

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Originally posted here