While managing to gain and close higher than the previous week’s high, there are considerable divergences showing up. Recently trade has had increased volume on up days and reduced volume on down days. While not getting the CFTC data on Friday, total open interest has declined significantly (over 320,000 contracts) since early February, with a large portion of those declines coming from the speculative Managed Money short position (discussed on this website several time last month). All of these events have occurred yet prompt prices have largely staying between $1.73 and $1.88. Lower lows since February have not been confirmed with RSI levels (weekly) creating yet another potential divergence.
All of this seems to be confirming that the market is in a consolidation phase for the summer contracts. The same cannot be said for the winter 20/21 strip. These contracts continue to show sufficient sponsorship (see Chart above) to close above the 200 day Moving Average for the last seven trade days. This behavior to me suggests the market is slowly coming to the realization that the prevailing downtrend bias that has gripped the front end of the curve may not be around much longer. Look at the premium that June and July carry to the May prompt ($.13 and $.20 respectively), it is also showing a divergence developing in the trade. The period around May expiration will give us a clue for prices near term- as any premium afforded to the next contract has been quickly eroded post expiration.
Major Support: $1.611, $1.555–$1.519, $1.481
Major Resistance:$1.883, $1.993, $2.029, $2.08-$2.10, $2.34, $2.437,
Minor Resistance: $1.767-$1.78, $1.833