Author: Willis Bennett

Working Hard For the Money

Weekly Continuation

The week before last week, gas traded a total range of $.200, further defining already well – defined support and resistance this last week it traded a range of $.212. This last week after opening a little lower May reversed, rallied through last week’s high only to fail at its 50 day SMA and a trend line declining from its late January and early March highs. A daily reversal on 04/10 (very similar to the reversal traded exactly a week earlier on 04/03), preceded the largest daily loss of May’s tenure and with the highest volume. Support near the upper limit of a zone between May’s February and March blocked a test of the target zone ($1.600 – $1.700, and the “expiration” gap left on 03/27 .

The entire range traded during April, ($.237) is less than half of the range and well within the extremes traded during March ($.528, $1.481 –$2.009). The range traded during February was $.657, in January $1.355. Range contraction typically occurs, at or near the end of a downtrend as a “sold out” market attempts to define a base. Less common is a high volume price spike lower, which is characteristic of “capitulation”, followed by reversal also with significant volume. Given the persistent, extraordinary level of open interest the less common resolution not completely out of the question, but recent trade has the earmarks of the construction of a classic base.

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Bumping Upon a Ceiling

Daily Continuous

Still looking at the recent range trade, but I am noticing a trading behavior that seems to want to build on gains and test the “ceiling” of the recent range. This is the behavior of a market seeking to a price to force some short covering. Not saying that it is today with the storage report, but a behavior that should be respected.

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Spring Trade Action Similar to 2020 and Last Year

Weekly Continuous

Current patterns are showing some consistency to trade last year and back in 2020, as the market is stuck in a consolidating trading pattern (though at different price levels) during the late winter early spring time period. Prompt gas has a history of finding some support in the spring. From a Q1 low (which traded on 03/26), the ten years average rally is about 50%. Last year from a low traded on 03/29 at $1.944, the successive prompts rallied prices 46%, but it took until late June to achieve that increase. Most of last spring the gas market traded in fits and starts but did trade higher monthly lows in April, in May and in June. Prompt gas rarely trades a lower low during calendar April than it did in calendar March (once since 2016).

Some of the technical indicators have marginally improved in both of the last two weeks but remain negative. Mathematically based momentum indicators (none of which confirmed the April expiration lower low) continue to suggest bullish momentum divergences. Divergences are not critical to a major shift in bias, but ignoring them leaves you at peril.

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