Price exploded out of the recent range trade last week, primarily fueled by the weather conditions. Breaking above the high end of the range between $3.00-$3.05 only to challenge the highs from last November and then retracing back to the old resistance area at the close. Still, prompt gas finished higher for the seventh time in eight weeks. While closing above the historically important January high- March extended the rally to test its October and November highs. The now soon to expire contract retreated from that resistance but held short – term moving average support and on a closing basis the daily downside reversal highs of 02/05 and 02/11. Prompt gas ended the week only a couple of cents above where it began…3.069 v 3.046, but with increasing volume and open interest. Price, volume and open interest moving in the same direction suggest that the uptrend is sustainable likely to be extended. Further evidence of sustaining this rally is offered by another gain in the coming summer strip that closed nearly a dime higher at 3.050. This is above highest close during October rally. Unless usually March gas gives up a significant share of this week’s gain over its last three trading days, expiration will be above the highest settlements of Q4 (November 2.996, December 2.896).
From a technical perspective, the October high is critical. Failure to trade through that high before a significant decline will not doom the bullish bias trend (discussed here in the past)but will suggest the likelihood of the perhaps long period of a trading range until prompt gas is able confirm another higher low . On the other hand- a low lower than the December low would indicate that a renewed downtrend is in progress.