By FXEmpire.com
The natural gas markets fell during the session on Wednesday to come back down to the $3.05 level. This candle is very bearish, but we can still see fairly significant support at the three dollar level. If we get below $3.00, we think this would be a very bearish sign and could lead us to lower prices. However, it does look like the market has broken out and it seems likely that buyers will try to step in and give support at this point in time.
With all this being said, our playbook is pretty straightforward: we buy on a break of the highs which is the $3.20 level, or we sell on a break in daily close below the $3.00 level. The downtrend is still in effect overall, but one has to acknowledge the fact that this recent breakout does mean something.
As you can see on the longer-term charts, there is basically an “air pocket” between current prices and the $3.50 level. Furthermore, above that level we see nothing but air all the way to the $4.00 level. If we can get above some of these resistance areas, we could see a significant move higher.
Overall, we still are very bearish on natural gas for the long-term, but do recognize the fact that there will be wicked spikes when there are significant downtrends like we’ve had. We believe that this is simply a massive relief rally that is trying to give the sellers a higher price to sell from.
We fully expect a massive resistance at both the $3.50 and $4.00 levels, and as such would be all over shorting the market from those levels with a weak candle. Because of this, we are willing to be very patient in this market as we think that there is plenty of time to make any trading decisions in this long-term cyclical bear market. However, if we do get the break down below the three dollar level, we may not have a choice but to simply go ahead and start shorting right away.
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Originally posted here
