Commodities Watchlist: Buying Opportunity for Natural Gas?


 In case you missed it, Germany has entered the SECOND alert level of its emergency gas plan one week after Russia started tightening its gas supplies in the region.

The alert meant that companies are encouraged to find alternative supply sources and that they may soon pass on their increased costs to its consumers. Yipes!

Germany’s minister for economic affairs and climate action noted that should the country enter its THIRD alert level, then extreme measures such as rationing will be on the table. Double yipes!

Natural Gas: Daily

Meanwhile, spot prices of U.S. natural gas are seeing bearish candlesticks thanks to Freeport LNG, a major liquefied natural gas export facility in Texas, bursting into flames and unable to export its supplies.

Thing is, Freeport LNG is a facility that supplies Europe with gas. The longer the facility is out of commission, the longer other U.S. facilities will deal with higher demand from Europe. They could raise their prices!

NATGAS is currently flirting with the $6.00 psychological handle.

As you can see, $6.00 is not far from the daily chart’s 200 SMA, trend line support, and a key resistance zone in late 2021. Even Stochastic is on the bulls’ side with an oversold signal.

Buyers can start scaling in long positions at the first signs of sustained bullish pressure.

The $6.70 area is a good initial target though you can also eye inflection points like $7.50 or even $9.00 depending on the momentum we see in the next trading sessions.

Of course, if European companies do find other suppliers, or if forecasts point to higher supply or lower U.S. demand for natural gas, then prices could extend their downswing.

I’ll be looking at how prices react to a possible retest of the trend line support or even the 200 SMA to see if there are more buyers at the lower levels.