This week’s focus turns to the May 2014 Natural Gas futures (NYMEX:NG.K14.E), where the transition into spring seasonality and warmer weather has weighed down demand outlook. Over the winter months, we had continually seen larger than expected draws from Natural Gas supplies due to extreme winter conditions, but as US weather forecasts continue toward warmer levels, it appears the threat to already tight near-term supplies is diminishing.
Since reaching a high print of 4.893 a few weeks ago on February 24, 2014, May Natural Gas has taken a slight leg lower and consolidated over the past few weeks as it decides where it will head next. The Commitments of Traders report as of March 4th has shown traders have gone from a net long to a net short position on Natural Gas, which hints that the recent strong up-trend may be losing steam. In the near-term, I would agree with this negative bias, and look for a correction in the Natural Gas market.
For a swing trade, I would be a seller as the market moves below Friday’s low of 4.530. My near-term target would be the swing low of 4.393. This position would allow you to use the 20 day moving average as a resistance point, as this indicator has kept the market in check during the recent consolidation period. [Continue reading]