Last week’s close on some rebound strength (storage release weakness) gives hope to the bulls that the Feb contract will find its footing this coming week. Not believing in hope as a strategy, perhaps the market will resume the Thursday’s declines and test support from the Thursday low ($3.781) down to the $3.70 area before rebounding and and be well bid into into expiration for the 11th consecutive month. Following those expiration rallies none of the successor prompts continued to add substantially to the expiration related advances (October almost did) before retracing a chunk of the gain. January collapsed after December’s last day spike higher, February fell from 4.077 to 3.536 (a new continuation low and contract low daily close) after January was off the board before beginning to work higher. I can offer no explanation for this expiration phenomenon, only that history can present a trade strategy until it breaks trend. Prices may continue to rally from the Friday close, at which point the high from last week, around $4.39 (the false rally off of the long weekend), will present a solid target.
History provides that the last few days of trade in January and early February (March contract) have market a significant level (either high or low) for the tenure of March trade as prompt. From a long term perspective natural gas remains in a secular uptrend that began in June ’20 (discussed here since the fall ’20) defined by the trend line from that low found on the monthly continuation charts (below). Within that uptrend prompt gas has since early October been in an intermediate term down trend that has retraced 58.3% of the $5.034 rally from $1.432 to $6.466 (not quite a perfect Fibonacci 61.8% correction). As long as that secular uptrend remains in place– the appropriate strategy for trade is to work from the support levels defined from trade in the last year and selling the rallies at resistance.