Considering all factors, the current market outlook does not favor short-selling natural gas in the foreseeable future.
- The natural gas market experienced a relatively quiet trading session on Monday, with prices hovering near the 50-day Exponential Moving Average. This 50-day EMA is a key indicator often used to gauge short-term trends.
- Notably, in recent months, the 50-day EMA has been on a gradual upward trajectory, signaling an accumulation phase in the natural gas market.
- This accumulation phase is a strategic move to bolster natural gas reserves in anticipation of the increased demand typically associated with the winter season.
A closer look at the price chart reveals that the market is currently facing significant resistance around the $3.00 level. A decisive break above this level could trigger a surge in trading activity driven by FOMO. Beyond this point, the 200-day EMA comes into play, and there's a realistic target of $5.00, especially during the winter months. However, it's crucial to exercise caution when determining position sizes, as the natural gas market can exhibit its unique pace. The accumulation pattern observed over the past month underscores that this is primarily an investment-focused strategy. The exact timing of the breakout remains uncertain, but historical trends suggest it's likely during this time of year.
Even in the event of a price decline, the $2.50 level has proven to be a reliable support zone over the last few months. In the worst-case scenario of a breakdown below this level, additional support is expected around $2.00. Consequently, short-selling this market doesn't appear justified, especially given the inherent leverage in futures markets. The preferred strategy here is to maintain a long position, capitalizing on the anticipation of a significant upward movement.
Avoid Shorting the Market
In the bigger picture, it's important to acknowledge that the natural gas market is prone to fluctuations. For those with the capability, accumulating shares in an ETF represents a prudent approach. Alternatively, trading in the CFD market offers another avenue for participation. Holding onto the position aligns with the expectation of a substantial breakout. If the analysis aligns with market movements, there exists the potential to double one's investment. Importantly, this approach allows investors to generate returns while patiently awaiting the market's anticipated surge, a characteristic commonly associated with long-term investment strategies.
Considering all factors, the current market outlook does not favor short-selling natural gas in the foreseeable future. Instead, the focus remains on patiently awaiting and capitalizing on the anticipated breakout. The accumulation phase and the potential for significant gains maintain the investment thesis, while prudence and strategy guide the approach in this dynamic natural gas market.
(Click on image to enlarge)
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