January fell to test the target zone between $2.950 – $3.050 (mentioned in last week’s Daily), which corresponded to the upper boundary of the trading range constructed between early September and mid – November. The current prompt bounced from that clearly defined support, retested, then well – bid into the close, finishing the week above it. Prompt January closed $.289 lower, the first continuation decline in seven weeks. Average daily volume fell nearly 25,000 contracts from last week’s holiday volume (which was about 80,000/day less than the previous week). Declining volume as price falls is technically constructive (suggesting that the price decline is more corrective in nature. Accelerating volume would indicate that at least an intermediate term high is in place and unlikely to be retested. Total open interest for the five days (not from Thursday through Thursday because of the holiday) fell an estimated 7,500 contracts which is also technically constructive.
Typically the price of prompt gas falls from a mid – November/pre – Thanksgiving high (this year on 11/22 at $3.563) to an early December low. Wednesday’s low (12/04) at $2.977 has the earmarks of a typical early winter low.
