Natural Gas forecast for the week of June 30, 2014, Technical Analysis

The natural gas markets fell again during the course of the week, testing the $4.60 level but failing. Ultimately, we did push towards the low of the recent consolidation area, and as a result we now find ourselves in a situation where this market is going to test significant support. The fact that we closed the very bottom of the range of course is very negative looking, but it really is and until we clear below the $4.20 level that we feel confident enough to start selling again. On the other hand, a supportive candle in this general vicinity would lead to more consolidation, and a move up to the $4.80 handle.

It’s quite possible that this market continues to consolidate over the course of the summer, because you have to keep in mind that liquidity is about to drop off as traders go to holiday. On top of that, there are various different things pushing the natural gas markets around, not the least of which is the Russians and the Ukrainian situation. Remember, although the situation is somewhat calm then it once was, the truth is that the Russians are still “warning” the Europeans about reselling natural gas to the Ukraine. As long as there is tension about natural gas delivery and shipment in the European Union, that could provide a little bit of a support base for this market.

On top of that, we have the absolute opposite situation. We are heading into the warm months in North America, meaning natural gas will drop off dramatically. Some people try to use this as an alternate energy play, as petroleum prices rise making natural gas prices more agreeable for power production. However, it should be noted that the switchover process is in an overnight thing, and as a result that is simply going to be short-term ebb and flow type of moves. Ultimately, natural gas should find itself in some type range, the question then becomes whether or not it is the one it was in previously, or one below current levels.