Author: Willis Bennett

OOPS– Declines Didn’t Extend This Time

Daily Continuous
Spot May Contract

Well, I warned you that prices had not accomplished much with the declines and had to prove the point by breaking down through serious support levels. No such event and I did not even need the stop losses. Market should now test the resistance area and remain in this consolidation process.

Support: $2.422-$2.414, $2.373–$2.356,$2.255-$2.176
Minor Support: $2.483, $2.162
Major Resistance: $2.74-$2.789, $2.89, $2.98-$3.05,
Minor Resistance:$2.806

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Possible Breakdown

Daily Continuous

Finally got a probe at the close to break below the March lows. While bearish from a technical standpoint, if this decline is made of the power to rock lower it will need some daily declines testing and breaking further support zones continuing lower. Other than shorting — may think about buying the dip with stops tight.

Support: $2.422-$2.414, $2.373–$2.356,$2.255-$2.176
Minor Support: $2.483, $2.162
Major Resistance: $2.74-$2.789, $2.89, $2.98-$3.05,
Minor Resistance:$2.806

Declines to Test Support- Range Continues

Daily Continuous

Well, guess the holiday got some bears fired up, but they could only challenge (and short of that) the lows from March. Nothing to keep this trader from buying support. Lets see if they have the power to drive to the next level.

Support: $2.422-$2.414, $2.373–$2.356,$2.255-$2.176
Minor Support: $2.483, $2.162
Major Resistance: $2.74-$2.789, $2.89, $2.98-$3.05,
Minor Resistance:$2.806

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Higher Range — Same Action

Daily Continuous
Spot May Contract

Prices last week ran just up to the 200 Day SMA in the May Contract before failing and retracing back to the middle of the range. Spoke in the Good Friday observations about volume and the lack thereof in the current environment and last week was on of the lowest 4-Day weekly volumes in many years. The shorts loaded up last month (seemingly on Mondays) and now they seem limited in additional contracts to sell per my writings last week. The low end of the range is $2.52 and the high side is that 200 day SMA in the May contract.

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Good Friday Observations

Daily Continuous with Volume

History shows that more often than not seasonal lows trade with declining volume. Volume on Sept 22nd was substantially less than the volume of the day before or day after. The retest of the late Dec low (also a relatively lower volume day) on January 22nd when the January low was traded at 2.414. The technical indication is that whatever downside momentum that was carrying prompt gas to that low, was or was about to be exhausted. Another way of analyzing this the sellers were running out of participation to drive the bid lower. Perhaps, a variation of that pattern is going on right now. A week ago, April gaped lower on Monday, traded quietly in a range for a couple of days then spiked down toward a test of the January low. Interestingly, the volume on 03/18 exceeded that of 01/22 by more than 100,000 contracts, suggesting that there may be enough additional selling (discussed here) to challenge the conventional and moving average support (the 200 day SMA was 2.447) and leave prompt gas below the trend defining 40 week SMA. Since that spike lower with 415,730 contracts traded the market has preformed an “outside” day reversal to the upside (March 24th). Average daily volume for week ending Mar 26th declined an estimated 80,000 contracts from a week earlier and was the lowest since the holiday shortened Christmas week. Perhaps there is additional selling waiting, but last week’s expiration suggests that volume has sufficiently dried up to indicate that there has been a successful test of the January low during March, looking like an intermediate term low with of the construction of the lower boundary of a trading range.

Some additional support for that view can be found in the change in open interest. The last three meaningful increases in the total number of contracts outstanding were on 03/12 (when selling continued into the weekly close, suggesting lower prices were in store when trading resumed discussed here), 03/15-when prices began the next week with a gap lower, and on 03/18-when April tested the 200 day SMA and January low. Those increases indicated that short sellers were throwing increasing positions significantly, attempting to drive it lower. These actions proved successful the first two times. April fell from a high of 2.714 on 03/11 to that 2.422 on 03/18. Since the 03/18 low open interest has declined each day indicating that gains have been significantly attributable to profit taking (the rally around expiration can also support this view) and does suggest that weakness should be bought near term.

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Quiet Probe Lower

Daily Continuous

Prices just melted down quietly yesterday in front of the storage report this morning. Not sure that the report will have a serious directional impact — but you never know. Teased you earlier this week on some observations regarding the price action, volume and volatility and will likely be publishing those comment on Friday for your digestion over the weekend. With Easter upon us, this will be my last Daily until after the Holiday.

Support: $2.422-$2.414, $2.373–$2.356,$2.255-$2.176
Minor Support: $2.483, $2.162
Major Resistance: $2.74-$2.789, $2.89, $2.98-$3.05,
Minor Resistance:$2.806

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Consolidation Is a Bias

Daily Continuous

That title is some “tongue in cheek” but not totally inaccurate. The last two weeks of March trade (April contract) was with in a tight range that could be considered a consolidation pattern. Perhaps the trade in April with May will remain between $2.58 and $2.70 signalling a consolidation pattern. Other options is for the May contract to melt down into the low $2.50’s returning the market to last month’s range, or to rally above the $2.70 area and potentially strong short covering rally. Stay disciplined here and play the ranges.

Support: $2.422-$2.414, $2.373–$2.356,$2.255-$2.176
Minor Support: $2.483, $2.162
Major Resistance: $2.74-$2.789, $2.89, $2.98-$3.05,
Minor Resistance:$2.806

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May’s Game Starts at Mini-Range High

Daily Continuous

Doubt that prices will just explode with the new prompt / early May contract. Of more importance is how does the market behavior over the coming period of time. Expect prices to try to and test the low end of the range into the high $2.50’s eventually and that movement (the results) will define a directional bias for the May contract.

Support: $2.422-$2.414, $2.373–$2.356,$2.255-$2.176
Minor Support: $2.483, $2.162
Major Resistance: $2.74-$2.789, $2.89, $2.98-$3.05,
Minor Resistance:$2.806

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Expiration – Concentrate on May

Daily Continuous
Spot May Contract

Spoke last week about the Monday tendencies, which were not confirmed last week, but they are showing some interesting trends that I will go into during the week in the Weekly area. In the mean time- should April go out weak, expect the May to retrace near the expiration. Should April go out with some strength, look for May to extend the gains. Should April expiration be flat (expectation), expect May to continue the recent range activity.

Support: $2.422-$2.414, $2.373–$2.356,$2.255-$2.176
Minor Support: $2.483, $2.162
Major Resistance: $2.74-$2.789, $2.89, $2.98-$3.05,
Minor Resistance:$2.806

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Expiration April – What Bias for May

Weekly Continuation

April started its prompt role with a slight rally only to succumb 10 days into trade, left a gap on the declines, that remained as resistance until last week. The brief run closed the gap but there was unable to additional progress. Soon to expire prompt traded through a previous week’s high and recorded a gain for the first time in five weeks. This all occurred on declining volume which leads this writer to conclude that the chances of April expiration above that of March’s ($2.854) at slim to none.

May Contract

Now May comes into the spotlight as prompt on Tues. In the chart above the May contract also had a gap that finally closed last week. It also traded we with in the range between $2.49 and $2.64 similar to the range in the April contract. Some interesting developments in the open interest and volume that I want to dive into and explain later in the week. Not sure where the April is going to end, but regardless, May is likely to come back to the April close if it is weak and/or if April closes strong, May will likely try to extend those gains.

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