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Natural gas markets rallied quite significantly during the day on Friday, slamming into the $3.25 level. At this point, it looks as if breaking above the $3.25 level could send this market to the $3.30 level next, which of course has even more resistance built in. While natural gas is typically bullish this time of year, the reality is that we are overextended at this point. I think given enough time, we will probably break down a bit and go looking for support at lower levels, as it offers more value. The natural gas markets of course move based upon weather, and potential industrial demand. With colder temperatures in the United States coming in and of course industrial demand pick it up due to the economy, it makes sense that natural gas would rally a bit. However, we have extended so much in the way of gains that perhaps we need to pullback in order to attract fresh buying.
I think at this point the $3.35 level continues to be a bit of a ceiling in the market, and therefore it’s likely that we will build a break above there. At this juncture I am much more comfortable buying dips that I am trying to “pay up” for the commodity, as it has been extraordinarily volatile as of late. It looks as if we are trying to break out through a major move, but the sellers continue to come in and flood the market. I do believe that we will continue to see a bit of positive momentum for the next couple of contracts, but obviously we have gotten ahead of ourselves.
This article was originally posted on FX Empire
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