A Friday With Consolidation

Weekly Continuation

Some noteworthy events occurred last week with the expiration of the Sept contract. Expiring at 2.579 (highest settlement since last Nov), the 2020 Sept contract jolined three other years in the last twenty years to remain well bid into expiration. The historical trend is for weakness to carry the market during the Sept expiration due to its proximity to the Labor Day holiday. In each of those three prior, Sep contracts that were well bid were, in ’02 a reversal from the Q3 ’02 low confirmed an uptrend that did not culminate until a Feb ’03 spike above $11.00. The second year was in ’05 and hurricane drama events took prices on to a December spike to over $15.00. The third year was in August ’13 when a bounce off of the Q3 low did not end until the following February (very similar to ’02). Due to the similarities to historical events it may be prudent for traders and hedgers to understand that with natural gas price movements sometime rhymes.

Weekly Continuation with RSI

Have been discussing the last couple of weeks, the need for extended bull markets to “feed the bull”. This event is confirmed with gaining open interest on higher volume. While prompt gas has closed higher for four consecutive weeks, volume has steadily declined and open interest has continued to decline over the period with short positions having to cover. These two events occurring will not support an ever increasing price level.

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