Nat Gas Ripped. Is it Oil's Time to Shine Now?

Recently, natural gas futures had a big rally. This was mostly due to the spat of severely cold weather that came unexpectedly and spread across the entire United States.

Economic data in the U.S. has shown that natural gas in storage has been dropping since the beginning of December. Based on the laws of supply and demand, this could have added upward pressure on the price of the commodity.

It should be noted that natural gas in storage is still above seasonal averages, and warmer temperatures are expected towards the end of Janurary. So there is no telling how long this rally in nat gas will last. If the severely cold weather persists and there is no build in nat gas storage, then we might see elevated prices until the situation changes.

If you were able to catch my previous comments on natural gas, then you might be holding some nice gains. The commodity rallied as much as 30% since. You can see my previous post by clicking the link directly below.

With the Red Sea tensions continually escalating, one might expect oil prices to climb similar to the manner in which natural gas had rallied.

The technical setup for oil is in a similar situation that nat gas was before it jumped over 30%. The current downtrend in crude futures seems to be forming a base, and the technical indicators are about to flip into bullish territory. If the Red Sea tensions don't settle down, then we may very well see some upward pressure in oil prices. Global economic growth could put upward pressure on the commodity, but so far, the economic data around the globe is not showing much of a growth story.

Technically speaking, in order for there to be a potential end to the current downtrend, then we need to see the price action climb above and stay above the horizontal and trending resistance levels I have highlighted on the chart. After that, we need to be weary of a false breakout like we saw a few days ago. It is always possible that crude prices could stay rangebound near the current levels.

In order for a technical uptrend to be official, then we need to see the price climb above the previous highs that I highlighted on the chart. This would be the first sign of an official uptrend. Whether or not the potential uptrend will last is still in question.

Personally, I would not believe in any oil rally until I see it with my own eyes. Several times in the past, the media has swayed me into going long on oil much too soon. I will not be jumping the gun too early this time around.

As always, I am not a financial professional, and this is not investment advice. Be careful and be patient. Dont anticipate the market. Rather, participate in the market. Don't invest money that you can't afford to lose. Give some of your investments time and know when to cut your losses.

Don't be greedy. Don't invest in anything you don't understand. Don't put all of your eggs in one basket. Don't listen to the hype. Don't fomo or panic into or out of trades. Do your own due diligence. And just follow the trends. A trend is your friend. Good luck trading.