Natural Gas is one commodity that has historically had the benefit of breaking free from the weekly volatility in the market. Natural Gas is typically delivered through heating networks, like electricity and natural gas, as well as through the oil refineries that operate via steam. This commodity enjoys the benefit of not experiencing the volatility associated with crude oil and other basic commodities. The breakouts of Natural Gas are most commonly found during the periods of time when oil prices are lowest, and they occur most notably during the summer.
Oil is by far the highest-priced commodity in the world. During the week on which winter is ending, the price of oil actually goes up. When the US begins to experience above normal temperatures for a longer period, oil’s price breaks down. Over the last several months, the number of natural gas breakouts has picked up and coincides with an increase in the number of oil refinery operations.
Natural Gas breakouts tend to follow an overall pattern. They usually occur during the summertime when the weather in the northern hemisphere is generally warm and the ground temperatures are significantly colder than normal. With the exception of the western United States, this temperature change tends to extend all the way through to the eastern US, and in some cases to the Canadian border. In addition to the breakouts of Natural Gas, there have been consistent high pressure areas in the atmosphere that tend to bring about persistent high gas prices.
Natural gas has a peak and valleys characteristic. Natural gas prices tend to break out at certain points along their supply path. The price of gas tends to peak near the mid-point of this supply route, before declining rapidly as it begins to move downward in price. It is common for breakouts to occur around these points, especially when demand exceeds supply for the commodity.
Breakouts can be accompanied by other factors. The timing of a breakout is likely to coincide with the highest prices of Natural Gas. When this occurs, traders may begin to look towards options that would take advantage of the high gas prices and possible move the price further downward. Traders may also begin to worry about oversupply and look towards options that would take advantage of the low gas prices.
In addition to breaking out with the rising trend, breakouts are likely to continue as the price of gas continues to exceed the long-term average. If the trend continues upward, there is a high likelihood that prices of gas will continue to increase until it meets the price of coal over the coming years. In most cases, it is the long-term upward trend that pushes prices of gas upwards. However, it is important to understand that the trend lines can easily be broken, but the chances of a breakout are inversely proportional to the size of the rise in gas prices.
One important factor for predicting the breakouts, or lack of breakouts, is the duration between the formation of the breakouts. Usually, a breakout is formed within just one trading day. Since most Forex traders use technical analysis, most traders expect price movements to be consistent over the period. Some traders believe that breakouts will not occur until there is an oversupply of gas in the market. Since this seems to be the case, there is a high probability of gas price increasing above the long-term average before the end of the present trend.
This is why most traders prefer to set stop loss orders at the breakouts. Since the price usually exceeds the bid price, a successful trade order is essential to minimize losses. To some traders, the price of gas is considered a risk-free instrument. However, it is advisable to keep track of gas prices over time to predict when the next breakout may occur. As a trader, you should be familiar with most of the signs for predicting gas price increases so that you can take appropriate measures to minimize losses in case the trend reverses direction.