Technical analysis holds that once price has broken through the upper boundary of a well – defined range of significant length and done so with internals confirmation of the break, the technical expectation is that the prompt will return to test the breakout level. If the breakout is valid volume during the retracement will diminish and open interest will fall–not necessarily back to the prior low (the total number of contracts outstanding on 09/27 with price at $2.764 was the lowest since 01/30). Support bracketing the old range boundary will limit further decline and prompt gas will trade a higher low and begin to recover for a retest of immediately preceding high. Assuming that price action confirms the breakout level the last low and the higher low will provide anchor points for a new short – intermediate term uptrend. In the current case the upper boundary of the trading range was defined by the March high and then the August and September highs, all between$2.997 and $3.027.
Discussed a comparison to a similar range constructed between Q4 ’20 and Q2 ’21 . Once that construction was resolved to the upside prompt gas did not exactly conform to the expectation of testing the breakout. Rather, trade went very quiet for over two weeks then prompt gas tested support and provide an anchor point for a rising trend line that held over the next four months.
