If you were a market-maker...

The above is Natural gas chart. As you can see, the Dec contract is testing 5.8 level. We tried that level in late Sept, but quickly got rejected, tried again and got rejected twice. Sure it looks like a strong resistance.

Now if you were a market maker what would you do? Think about how many stops are there above 5.8 level. I do like the fact that we came down to 5.2 level a few days ago before we got to 5.8 level to suck more sellers. NG markets got pretty quite at this 5.8 level right now and I'm pretty sure it'll test above 5.8 to see if it'll not only run stops but also to see if it brings new buyers.

What's more interesting is 6.2 level. If you've been shorting / trailing NG, where would your stops have been? Aggressive stops should be around 5.8-5.9, but you'd be definitely out if NG goes above 6.2.

Sure it'll just test and come right back and NG tends to do that many times. My plan is to cover all of my NG positions onto this type of move.

Note that the front month (Nov) contract acts slightly differently as spread widens and tightens. Since the Nov contract expires next week, I just wrote about Dec contract.

I'm still holding 1 Nov 5.0 call and 2 Nov 5.25 Call.