After chopping back and forth for the past few months, the price of natural gas looks poised for a big rally.
Natural gas peaked last summer when it traded near $9.50 per million British thermal units (MMBTU).
Today, the “widow maker” trades near $2.50. That’s a 74% decline over the past nine months.
And, it explains why traders call natural gas the “widow maker”…
It’s notoriously hard to trade. And it’s prone to outsized moves – which often don’t comply with any sort of logic.
Nonetheless, like moths to a flame, traders are attracted to the action in natural gas.
And, right now, that action looks like it’s turning bullish – just as the seasonal patterns turn bullish as well.
For whatever reason, the price of natural gas tends to rally during the summer.
In 2020, for example, natural gas rallied from $1.60 to $2.70. That’s a 69% gain in just over two months. The price doubled during the summer of 2021. And, last year, natural gas rallied from $5.50 at the start of July to $9.50 at the end of August.
It looks to me like we could see an even stronger rally in natural gas this year.
Look at this chart…
After declining sharply at the beginning of the year, natural gas has spent the past few months chopping back and forth inside a relatively tight trading range between $2.10 and $2.60. This action is building up energy to fuel the next big move – which I suspect will be higher.
All of the various moving averages have coiled together. And, they’re in a bullish formation – with the 9-day EMA above the 20-day EMA, and the 20-day EMA above the 50-day MA.
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If natural gas can close convincingly above the resistance line of the consolidation pattern – at about $2.60 – then there’s no real resistance until about $5.00. In other words, natural gas looks poised for a 100% rally.
Granted… nothing in the markets is ever guaranteed. And, natural gas is called the widow maker for good reason.
But with the seasonal factors turning bullish, and with the chart pattern looking bullish as well, I like the odds for a strong rally in the price of natural gas.
Best regards and good trading,
Jeff Clark
READER MAILBAG
What’s been your experience trading natural gas?
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