Author: Willis Bennett

Lots Happening

Weekly Continuous

Wow — that’s Natural Gas. The breakout last Friday brought back memories of when Natural was a brutally volatile commodity. Eliminating serious resistance zones ($3.198, $3.25,and $3.329) without blinking and testing the yearly highs with a range of $.181. However, perhaps the market got a little too exuberant when it tried to take out the Jan high of $3.329 (it traded just $.001 above) or the late Oct/Nov high of $3.396, before retracing the gains but still closing the week at the highest weekly close since that late Oct rally.

All of that action, left prices over the 2 standard deviation band above the 20 week moving average (chart below) and had prices hitting the extreme zone of the daily RSI chart and approaching the extreme zone in Weekly chart (see Daily further below).

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Over-Bought But Will It Extend

Daily Continuous

That is a breakout as prices ran through resistance with huge volume and gaining open interest. Prices are now a little over-cooked but that may not stop additional gains, however, they will have to consolidate the breakout before moving on. Mentioned significant areas in the Weekly area and some analytics behind last Friday’s explosion. The key for the next couple of days is the late Oct highs at $2.39, mentioning in the Weekly that if prices do not garner the support to break that high — then expect some consolidation.

Major Support: $3.198, $3.12, $3.00 $2.914-$2.886, $2.78, $2.71-$2.70
Minor Support: $$3.251, $2.694
Major Resistance: $3.321-$3.33, $3.396, $3.482

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Slight Extension Higher Followed by Retreat

Daily Continuous

Prices were gaining some momentum and then the storage release brought the house down with prices retreating to yesterday’s close. It remains a bullish trend (discussed since last fall) and mentioned yesterday about the nature of the gains in a bull market. This run is not based on sudden short covering, as open interest has gained this week on the higher volume, clearly supporting the market internals. This week’s extension strongly suggest that dips in natural gas should be buying opportunities.

Major Support: $3.00 $2.914-$2.886, $2.78, $2.71-$2.70, $2.658, $2.52, $2.422-$2.414
Minor Support: $2.876, $2.694, $2.483, $2.162
Major Resistance: $3.12-$3.15, $3.198, $3.251, $3.31, $3.396

Consolidation in the Latest Range

Daily Continuation

The market seems to be establishing a new (or latest) range for prices to work with in. What was old resistance at $3.00 now seems to provide support for declines and the highs have now created $3.20 as the new high end of the range. We have witnessed the price to work within the range that has developed in each of the last three months, though each range had different values for support and resistance. This type of stepping upward is a characteristic of longer term runs but we are headed into a notoriously and consistent period of the year (Q3) for lower prices. A struggle may be brewing (not this week but later in the month) for rallies to endure and extend.

Major Support: $3.00 $2.914-$2.886, $2.78, $2.71-$2.70, $2.658, $2.52, $2.422-$2.414
Minor Support: $2.876, $2.694, $2.483, $2.162
Major Resistance: $3.12-$3.15, $3.198, $3.251, $3.31, $3.396

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Old Resistance Continues to Hold Support

Daily Continuous

The resistance area around $3.00 which proved so formidable for many months has now held as support for a couple of tests. This has created a narrow range at $3.15 and beyond the $3.15 there is numerous area that will prevent prices from getting to out of control. Would still suggest that prices need to retrace (consolidate) some of the gains.

Major Support: $2.914-$2.886, $2.78, $2.71-$2.70, $2.658, $2.52, $2.422-$2.414
Minor Support: $3.00, $2.876, $2.694, $2.483, $2.162
Major Resistance: $3.12-$3.15, $3.251, $3.31, $3.396

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Prices Firm Above $3.00

Weekly Continuous

Discussed my thoughts that the high for Q2 may not be in last week and I do not consider the retest of the earlier high of $3.15 last week to fulfill my expectations. That said, last week’s close was the highest weekly close in the July contract suggesting strength coming into this coming week. We have seen this type of activity several times this spring where the week ends well bid or well offered only to see a reversal when it opens the following week. I am not convinced the $3.15 is the Q2 high and would prefer a retest of support, followed by a rally that defines the Q2 high.

Prices did close right on the downward sloping trend line off of the Nov ’19 high that forms the resistance area for the “wedge” discussed previously. Last week’s action occurred with higher volume and gaining open interest which are both confirming market internals to higher highs yet to come.

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A Weekly High Close

Daily Continuation

Prices finished the week with a new high weekly close for the July contract and did so with higher open interest and supporting volume supporting the gain in price. This activity is presumed bullish, but July faces an array of formidable and well – defined resistance. The highs of week ending 05/24 (the May high), the high of the past week and the May high of July gas (3.204) are nearly or greater than two standard deviations above the 20 – week SMA. Additionally, prompt gas has historically felt the weight of seasonal pressure during the first couple of weeks of June (historically around the holiday), however, this year the weakness was prior to the holiday. This will need to be defined in the coming week.

Major Support: $2.914-$2.886, $2.78, $2.71-$2.70, $2.658, $2.52, $2.422-$2.414
Minor Support: $3.00, $2.876, $2.694, $2.483, $2.162
Major Resistance: $3.12-$3.15, $3.251, $3.31, $3.396

Consolidation

Daily Continuation

It is beginning to look like prices aren’t going to melt down on the run up to $3.15 as they did in previous runs. The other major difference is the fact that open interest is gaining while prices have traded over $3.00 and the volume this week is greater (on average) than last week. This is starting to look like a consolidation pattern that will keep the floor around $2.90-$3.00.

Major Support: $2.914-$2.886, $2.78, $2.71-$2.70, $2.658, $2.52, $2.422-$2.414
Minor Support: $3.00, $2.876, $2.694, $2.483, $2.162
Major Resistance: $3.12-$3.15, $3.251, $3.31, $3.396

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Prices Hold the $3.00 Level

Daily Continuous

The action yesterday created an inside range from the range on Monday– bu the key was they did not melt down from the rally as they did last week and earlier in February. This is a bullish indication that prices may consolidate the gains and extend higher later in the month. As a trader- I would like to see the market retrace to the break zone last week at $2.90 and then see how it reacts. Continue to play this new mini-range between $3.00-$3.15 for now.

Major Support: $2.914-$2.886, $2.78, $2.71-$2.70, $2.658, $2.52, $2.422-$2.414
Minor Support: $3.00, $2.876, $2.694, $2.483, $2.162
Major Resistance: $3.12-$3.15, $3.251, $3.31, $3.396

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Will Gains Hold

Daily Continuous

Strong gains yesterday, confirming the gains from Sunday and Monday. Pardon my skepticism, but we have seen this kind of rally dwindle away in the next day. The question remains how much it retraces the gain and / or does it maintain the support levels. Further gains beyond resistance will set up for additional gains. Declines will take prices back to the old range trade.

Major Support: $2.914-$2.886, $2.78, $2.71-$2.70, $2.658, $2.52, $2.422-$2.414
Minor Support:$2.876, $2.694, $2.483, $2.162
Major Resistance: $3.12-$3.15, $3.251, $3.31, $3.396

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