(MENAFN- Daily Forex)

• Natural gas has shown strong upward momentum around the $4.30 level, but I remain cautious about chasing the rally.
• With seasonal demand increasing and cold weather approaching, I favor a buy-on-dip approach targeting longer-term gains toward $5.

Natural gas has been a bit noisy in the early part of the Wednesday session as the $4.30 level seems to be a bit of a magnet. That being said, this is a market that had gapped at the open of the December contract and simply went straight up in the air. It is because of this that I am a little bit cautious in trying to get overly aggressive here, but I also recognize that you cannot short the natural gas market. Quite frankly, even if you told me natural gas was going to drop the next two or three days in a row, I would simply sit on the sidelines and wait for an opportunity to buy it.

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Being the December contract, it means that we are in fact going to see quite a bit of demand and the occasional cold snap to drive higher pricing. It's worth noting that temperatures on Sunday in the Northeastern part of the United States are going to start dropping, and that, of course, drives up demand. Ultimately, that's exactly what moves this market more than anything else-the cold in the northern part of the United States as well as Europe Time of Year

With that being said, it is worth noting that we are in that cyclically strong time of year. Therefore, I approach this from a buy-on-the-dip or long-only scenario. The $4 level underneath should be a certain amount of support, but even if we were to break down below there, I think somewhere near the $3.60 level it becomes too cheap for people to ignore.

Over the longer term, it would not surprise me at all to see natural gas go looking to the $5 level, but it's going to take a while to get there-unless of course there's some type of external pressure. With that being said, this is a market that ultimately should be rather bullish, but it doesn't pay to chase the natural gas market after a move like this, as the volatility can be quite wild.

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