Author: Willis Bennett

Trend Continues With Strong Expiration – Weakness For a Day

Weekly Continuation

As expected, prices rallied into the expiration process, setting the week’s high only to give a chunk of the gains up as June took over as prompt. Was interesting for this observer to watch the Friday trade on a 5 minute chart as prices leaped up from $7.05 to $7.30 in a matter of 10 minutes . That action smells to this trader as the machines and the algorithms rocking the market (the same type of event happened last month during the $1.60 correction off of the highs). This type of activity can create serious risk issues for those of us the don’t have the machine based algorithms nor the quickness to respond to bid/offer spreads with volume. Not complaining, just wanting to make you better at understanding the potential risks in your trading.

Prompt June but again found support at the rising trend line and 20 – day SMA with value of the trend line being $6.785, the 20 – day SMA of June gas was 6.796…the low trade 6.805. Successive months have now held their 20 – day SMAs as the most recent series of higher lows has traded and provided low risk entry points.

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Similar Sunday Night Routine

Daily Continuous

It is not surprising after the 10 minute — $.20 run in prices on late Friday morning (discussed in Weekly section) that prices are showing strength in the early Sunday night action. Wouldn’t think that the “kids” would miss an opportunity like that. Ran all the way to the resistance that prices could not over-come last week– perhaps they will this week. A daily close above that high will bring $8.00 into target.

Major Support:, $6.855, $6.411-$6.392, $6.247-$6.278, $5.27-$5.199, $5.001, $4.40-$4.26, $4.187
Minor Support: $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $7.346 , $7.422, $7.536

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Starts Similar to March

Daily Continuous

In reference to the Daily yesterday the price movement looks more like the action from March rather than April. Would not be looking to pound from a short side and as the market remains with a bullish bias currently. If you want to be short — look down to $6.66 (April low on Continuous chart) — if you want to be long look to yesterday’s high as an initial target for gains.

Major Support:, $6.411-$6.392, $6.247-$6.278, $5.27-$5.199, $5.001, $4.40-$4.26, $4.187, $3.972, $3.734
Minor Support: $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $7.346 , $7.427, $7.536

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March or April

Daily Continuous

Yes, I realize it is May but wanted to show the choices that the market has for near term direction. When the April contract took over in March as prompt there was some early softness into a brief rally only to have prices correct back and in the middle of the month retest and consolidate as the low end of the range (short term). Calendar April (with May as prompt) had no such silliness and just took off to higher ground setting a series of higher weekly highs until prices got so over bought, that the $1.40 correction was imminent. What does June do– if it replays last month’s action — rest assure that the $8.00 area is in focus. Should the trade copy March — a retest of the mid-$6.50 area may be coming.

Major Support:, $6.411-$6.392, $6.247-$6.278, $5.27-$5.199, $5.001, $4.40-$4.26, $4.187, $3.972, $3.734
Minor Support: $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $7.346 , $7.427, $7.536

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Running Into Expiration

Daily Continuous

What do we say — never bet against a solid trend and the rally into expiration is now rocking along. Have no clue to the range today but I did see that the June contract closed some of the differential while prompt chased over $7.00. Not sure what that is about as the differential to July ended back over $.20.

Major Support:, $6.411-$6.392, $6.247-$6.278, $5.27-$5.199, $5.001, $4.40-$4.26, $4.187, $3.972, $3.734
Minor Support: $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $7.346 , $7.427, $7.536

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Trend Seems To Be Intact

Daily Continuous

Mentioned in the web site that the market would have to decide between the weakness from last week’s action or the historical trend of rallying into expiration during the period. Yesterday gave a good early indication of the intentions for expiration. My interests are more focused on the summer contracts (I use July) and they currently are running with the May contract (either side of $.20 differential since the second week in April). It will be interesting to observe the June and July contracts during the May expiration and the initial phase of the June as prompt.

Major Support:, $6.411-$6.392, $6.247-$6.278, $5.27-$5.199, $5.001, $4.40-$4.26, $4.187, $3.972, $3.734
Minor Support: $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $7.346 , $7.427, $7.536

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Expiration Week — Potential Struggle

Daily Continuation

Prices opened with a large gap in the daily charts on Sunday — only to spend the next four hours closing the gap. There is a struggle this week between the historical trend of expiration’s being well bid versus the momentum from last week’s reversal (see Weekly section). This will provide some insight as to June’s tenure for the near term but the longer term bias has not changed as the market remains a bullish bias.

Major Support:, $6.411-$6.392, $6.247-$6.278, $5.27-$5.199, $5.001, $4.40-$4.26, $4.187, $3.972, $3.734
Minor Support: $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $7.346 , $7.427, $7.536

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Expected Correction Occurs

Weekly Continuation

Mentioned in the Daily last week that due to the “blow-off” formation that the gains from two weeks ago would be lost during the correction from the over bought condition. Prices did not quite make the week a technical “outside week reversal” but came close as they set a higher weekly high but not close below the previous week low at $6.247. While the collapse did not facilitate the defined technical term, the reversal after setting the high, was significant and invokes technical damage short term. This sets up an interesting battle– as discussed here for numerous months, price action during the month has been reasonably consistent over the last months as prices have weakened during the mid-month time period, only to find support and perform rallies into the expiration of the prompt contract. April has not provided that similar theme and has come into the expiration from a weakening bias. The trend for an extended period (nearly two years), has been for prices to rally into or during the expiration process (call it 5 days). There seems to be a struggle developing on the May expiration, as prices are weakening while the trend suggests the other direction. Not sure how the expiration plays out, but can express that the summer (Q2) rally has not achieved its goal regardless of the reversal.

The primary reason for that assessment is the open interest trail in the market internals– until a larger increase in participation (open interest positions) is in evidence the gas market is unlikely to trade a final high (September ’21 total open interest reached a high of 1,468,636 and final price high traded three weeks later. Open interest is currently 1,143,359 contracts- preliminary data from the CME, nearly the same as mid – December). As suggested a couple of weeks ago — this may be the end of a series of runs that may continue until June or July.

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Interesting Day of Trade

Daily Continuation

Discussed yesterday about the potential for consolidation and we got a taste of it when the storage report came out and prices fell to just above $6.70 only to spend the remainder of the day working back higher. We are reaching the May expiration and while last month showed significant gains from the 24th until the 28th (falling at the end), the trend continues to show well-bid expiration’s. Would expect that trend to continue until it doesn’t. The action from yesterday confirms my belief that the market is still well supported even with the $1.00+ decline from earlier highs.

Major Support:$6.538, $6.247-$6.278, $5.27-$5.199, $5.001, $4.40-$4.26, $4.187, $3.972, $3.734, $3.63
Minor Support: $6.757, $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $7.346 , $7.427, $7.536

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Phase 1 of Re-Entry

Daily Continuous

The initial phase of re-entry from the blast off (blow off) top started yesterday — but be cautious. The movement down below $7.00 was informative but not the end-all. The bulls may want to try consolidation for movements, but not sure if that starts until prices test the $6.50 area. Yesterday’s low went just down to the lows from Thursday (before the Holiday shortened weekend) only to find support (shocking). Still recommend patience here.

Major Support:$6.538, $5.27-$5.199, $5.001, $4.40-$4.26, $4.187, $3.972, $3.734, $3.63, $3.584-$3.522
Minor Support: $6.757, $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $7.346 , $7.427, $7.536

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