U.S. natural gas prices continue their rollercoaster ride at the height of the heating season, after extreme volatility gripped the market in the fall amid more-than-a-decade low natural gas inventories ahead of the winter.
The volatility in the natural gas market is likely to continue to be high through the winter, as inventories below the five-year average and seasonal storage draw make natural gas prices highly vulnerable to changes in the short-term weather models and forecasts.
Low storage level (relative to historical norms) is making the price extremely susceptible to changes in the weather models. Instead of pushing the price higher gradually by 5-10 cents a week, bullish changes in the short-term weather models create fear, which results in double-digit rallies over the course of a single trading session, as happened on Monday, January 14.
Shortly: The bullish changes in the weather models are resulting in an extremely exaggerated bullish change in natural gas prices. Prompt-month contract price can reach high levels and then correct vsharply even if weather turns only slightly bearish. In other words, prompt month contracts (February contract and, to a lesser degree, March contract) are very speculative and very risky to trade right now.
Looking at the NGAS February contracts, the price is testing the EMA 50 and Ichimoku Cloud support. We also see a bullish flag formation on the H4 Chart.
Our trade setup is to buy at 3.27 with
Update: Trade Reached the 3.51 and we closed the positions.
You can watch the trade: NATGAS TRADE SETUP
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DISCLAIMER: This is a technical analysis study, not advice or recommendation to invest money
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