The $3.33 level has repeatedly proven to be a major resistance point and is expected to remain somewhat obstructive.
- Natural gas markets saw another rally on Friday as traders closely watched the upcoming winter storm in the northeastern United States.
- The potential impact of the storm seems large, but natural gas is at a point in the season where sustaining profits over the long term is becoming difficult.
- This is especially true unless an event related to the offer occurs. Currently, supply remains plentiful, implying that this rally is likely a short-lived opportunity, possibly pending the release of inventory data.
The $3.33 level has repeatedly proven to be a major resistance point and is expected to remain somewhat obstructive. Even if this barrier is breached, given that we are already in February futures and close to moving into March, it is difficult to envision a sustainable future for the market. For now, signs of the market exhausting are absent, however I believe it is likely to be a situation where the market will react quickly to any signs of coolness leaving the area. This winter was a failure so I don't think anything is sustainable at this point.
But one certainty in this volatile market is that if the weekend storm doesn't live up to its dire predictions, gas prices could plummet. This market requires careful consideration of position sizing due to its unpredictability. It is important to note that CFD trading in the natural gas market is based on the Henry Hub contract in the United States. Unless a major event like last year's gas outage in Europe significantly affects the market, the focus remains on US weather. Currently, it appears that Europe's energy requirements have shifted towards alternative sources such as coal. Consequently, while the market may experience a temporary upswing, it would be wise to watch for signs of exhaustion as potential selling opportunities.
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In the end, natural gas markets rallied on Friday on concerns about an impending winter storm in the northeastern United States. However, seasonal dynamics and abundant supply suggest this increase may be short-lived. Resistance at the $3.33 level remains a key factor and sustaining gains beyond that looks challenging. Traders should remain cautious as market volatility means it can quickly reverse, especially if the expected storm does not materialize as expected.
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