Author: Willis Bennett

Range Developing

Daily Continuous

Prices expanded the range a little lower before recovering and rallying as the day went along. This is still a developing range trade and patience during the week would be the best suggestion after last weeks small explosion on expiration.

Major Support: $4.19-$4.186, $3.734, $3.63, $3.584-$3.522
Minor Support: $4.73, $4.52, $4.38
Major Resistance: $4.876, $5.088, $5.81

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Sunday Run Confirmed During Day

Daily Continuation

Early Sunday night strength melted during the early day trade only to be revisited during the remainder of the day trade. Market seems to be testing resistance at the new range that was developed during the trade last week. Would not consider the highs from the short covering expiration as the high end of the range but where prices trade to this week as a better indication.

Major Support: $4.19-$4.186, $3.734, $3.63, $3.584-$3.522
Minor Support: $4.73, $4.52, $4.38
Major Resistance: $4.876, $5.088, $5.81

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What A Week

Daily Continuous

Explained in the Weekly section about an issue with my charting software and not being able to chart the run on the expiration day of Feb gas. Will look to correct this week. Regardless of charting software– the market did not give up the gains in Mar gas and the open on Sunday night confirmed the strength on Friday. The Weekly section discusses the history of Mar gas after Feb expiration and trading in early February and recommend reading as it highlights what to expect this week. Due to the volatility around the expiration and Sunday night– I will be sidelined until the market has a chance to define its new ranges — that said it seems that the bullish bias to trade is back and that dips will likely be bought.

Major Support: $4.19-$4.186, $3.734, $3.63, $3.584-$3.522
Minor Support: $4.52, $4.38
Major Resistance: $4.73, $4.876, $5.088, $5.81

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Impressive Expiration Strength

February Spot Contract

Some house keeping issues first— above you will see the expiration of the Feb contract and it trading as high as $7.346. Unfortunately, the charting software that I currently utilize does not consider the expiration day in its Continuation patterns. Because of that the Weekly continuation chart below does not have that day in its profile — I am going to seek a remedy to this situation this coming week and see what can be done.

Weekly Continuation

The expiration related price spike took February to 7.346…the highest price since October ’08, and it became the eleventh straight contract month to rally during the closing days of their tenure. February gas declined from the low volume spike to go off the board at 6.265, the highest since December ’08 gas settled at 6.888.

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Ya Baby—Think That is a Well Bid Expiration

5 Minute Tick Chart of Feb Gas

Now that is a “wood shed” moment- The chart above clearly shows what happens when volume is light at expiration and some folks have to cover. The High of $7.346 is unbelievable and well above my closing range high for Feb gas in the Weekly section — That said, prices did return for a few trades with in the range. What is more important is the Daily chart below for March gas that takes over as prompt tomorrow. In the Daily chart below, notice it did not enjoy the same short cover squeeze that prompt Feb endured, rather staying well within the defined range.

Daily Continuous

Take a day or two to let the “froth” in the market to clear define it’s intention by consolidating in a new or similar range. Guess it is cold back East, buy gas now. Let this digest.

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Rally Right to Expectation

Daily Continuation

Mentioned in the Weekly Section that a rally might take prices to last week’s high (false holiday rally) and that is exactly where the expiring Feb contract went yesterday. As expected, the summer nor the March followed with such gusto. If you are still in the Feb good luck– for the March and summer months I think this is a good place to sit back and take a few breaths.

Major Support: $3.734, $3.63, $3.584-$3.522 63, $3.584-$3.522
Minor Support: $3.82
Major Resistance: $4.18, $4.32 , $4.39, $4.48, $4.73

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Nothing to Add

Daily Continuous

Cannot add anything to what has been said in the Daily and the Weekly– Options expiration is upon us–$4.00 will be important.

Major Support: $3.734, $3.63, $3.584-$3.522 63, $3.584-$3.522
Minor Support: $3.82
Major Resistance: $4.02, $4.18, $4.32

Early Weakness –Rally — Weakness

Daily Continuation

Not a whole bunch of directional information from yesterday’s trade, rather than the fact that prices rallied only to find sellers. Summer prices lagged the gains and losses but not by a significant amount. Have discussed the recent 10 month trend of expiration’s in the Weekly section and now the market enters the last three days of trade. Perhaps weakness continues for a day or so, but you can’t bet against the trend until it breaks.

Major Support: $3.734, $3.63, $3.584-$3.522 63, $3.584-$3.522
Minor Support: $3.82
Major Resistance: $4.02, $4.18, $4.32, $4.48, $4.73-$4.775, $4.818-$4.825, $5.045

Expiration Week – Trend Continue?

Weekly Continuation

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.

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Prices Rebound on Friday

Daily Continuation

Price action rebounded off of the lows from the storage report declines, bouncing off of weak support areas and found support as the day went on. This type of bounce is likely related to some changes in the forecasts and if your desire is to trade these chops then feel free. My concept is to show patience — wait for a strong test of support between $3.70 and last week’s low $3.78 to add to positions. Go into the expiration history in the Weekly section and strongly recommend reading it.

Major Support: $3.734, $3.63, $3.584-$3.522 63, $3.584-$3.522
Minor Support: $3.82
Major Resistance: $4.02, $4.18, $4.32, $4.48, $4.73-$4.775, $4.818-$4.825, $5.045