Natural Gas Falling Out of Favor
An unseasonably warm winter season along with ample supply of natural gas has caused futures prices to trend lower for the past few months. The precipitous decline in natural gas futures prices is now generating new multi-year lows on the chart. Prices have recently breached key technical levels of support, including the psychological $2.000 level. With that being said, the decline in natural gas is not an isolated incident. The entire energy sector has been taking a beating, most notably with crude oil trading around $36 or, about half the value that participants saw last year at this time. Has the market gone “too far, too fast”? Or are sub-2.000 levels in natural gas going to be the new “norm” going forward?
A contrarian argument could certainly be made for a long bias in natural gas at this point in time. Given the duration of this move, it’s not uncommon for market participants to believe the market is oversold and susceptible to a corrective rally, or perhaps even a change in trend. However, colder conditions for the remainder of the winter season will likely be needed, if not required, if this market is to change its course. Until then, the market will continue to sport a bearish tone and traders should be cognizant of this when considering trading strategies.
Erik Tatje |
