December Henry Hub natural gas futures have experienced concerted selling today, currently down 25 ticks for the session. This morning’s EIA natural gas storage numbers showed a build over last week’s report, prompting a moderate sell-off of the December futures contract.

Natural gas is an interesting market this time of year. As we move into the Winter months, demand for gas heat will increase, driving volatility.

In addition, this year brings a unique market dynamic. A new trade deal between the U.S. and China allowing the importation of American liquefied natural gas has been ratified. It is too early to tell what the impact will be on U.S. production and storage levels, but many traders and investors are eager to test their opinions in the live market.

Natural Gas Technicals

Natural gas can be traded via futures contract or CFD product. Henry Hub natural gas futures are the second most traded contract to WTI crude oil, averaging over 100,000 lots per day on the CME Globex. If you are looking for a viable diversification tool, natural gas may be the ticket.

December Natural Gas Futures, Daily Chart

A few of the key levels facing this market:

• Resistance (1) 38% Retracement     3.098

• Resistance (2) Daily SMA                 3.115

• Resistance (3) Bollinger MP              3.127

• Support (1) Oct. Double Bottom        3.013-3.012

• Support (2) Psyche Level                  3.000

Overview: Natural gas is prone to settling into rotational patterns, similar to the tendencies of WTI crude. For now, I will be buying just north of the Oct. double bottom at 3.026 while employing a 1:1 R/R scalping strategy with a stop at 3.009.

Tomorrow will bring us a converging resistance zone including the Daily SMA, 20 Day EMA, Bollinger MP, Fibonacci retracement levels. Check back during Friday’s session for a plan on how to engage the Henry Hub natural gas market using these levels.