By FXEmpire.com
The natural gas markets initially gapped up just slightly as traders jumped into the commodity. However, by the end of the US session, the market had reversed a significant amount of its gains in order to form a shooting star. This shooting star is of course a bearish sign, and although this market has been tough in the face of the bearish pressure lately – it is still in a bearish trend overall. With this in mind, we still prefer selling when the opportunity arises.
With all of that being said, the technical set up looks as if the market goes below the $2.60 level mark, it could continue farther south. The inability of the bulls to hold onto most of the gains in a downtrend would be most disconcerting if we were long, and as such we have to believe there are a lot of weak players out there just ready to throw in the towel at the first sign of trouble.
On a break below the $2.60 level, everyone who bought Monday and that is still in the trade is now losing money. This is why we like sell at this point as those who went long will have to sell in order to cover positions. This should be all means continue the downward momentum.
The $2.80 level above still looks tough, and should provide plenty of resistance in the near term. In fact, we think that there is a massive resistance “zone” all the way up to the $3 level. It isn’t until we are above that mark that we would consider buying this market as it is so weak in general. The supply and demand part of the equation is far skewed to favor the sellers, and there seem to be no real end to the new gas being found every day. With this in mind, it is hard to envision how this market gets too far north of here at this time.
We sell rallies that look weak in the end, and we sell a break below the $2.60 level.
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Originally posted here
