By FXEmpire.com
The natural gas markets had an absolutely smashing rally during the Thursday session as the US natural gas storage numbers came out much smaller than expected. This lead to a rally that had some people buying, and many more covering shorts. This move has smashed through several levels as this point, and it looks as if the market will have suddenly found some serious strength, and at this point we have to step back as we are massively bearish.
The supply simply is too strong at this point, even with the good news for the bulls during the session. The truth is that the market has seen a massive short covering rally, and although we still retain the same attitude of bearishness in this commodity, there is certainly going to be a period of “cooling off” after a move like this, and because of this we are going to stay out of this market for a couple of sessions.
The $2.60 level above could offer a fair amount of resistance, and we think that a weak candle at that level could be one to sell, but we won’t take the trade for at least a few days as a large green candle like this rarely gets reversed right away. The bulls will simply have to be turned away by the lack of follow through in order to close their positions. For example, someone who bought at the start of the spike in price certainly will want to let their trade run a bit in order to see if it can continue. Because of this, it is very possible that it will take a few days of lackluster action in order to get these traders out of the market.
Because of this, we aren’t going to be looking for an entry until Tuesday or so, and will look to sell the first weak candle above. If the market manages to get above the $3 level before then, however unlikely, we would buy. A lot of attention will be paid to the $2.80 and $3 levels.
Click here a current Natural Gas Chart.
Originally posted here
