Author: Willis Bennett

Range Before Storage

Daily Continuous

My apologies for not getting this out through the email– I had some server issues that prevented such.

The prices have developed into a mini-range between $2.50 and the gap from the Nov premium. Almost seems like the trade is waiting for the next shoe to drop (perhaps storage report). From a technical standpoint, buy in front of the area of key support ($2.38-$2.40) with stops tight. When and if prices break below, the trip to $2.10 should be quick with just a couple of support zones. Still looking at years when winter was “over” in December only to find a reversal of thought.

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The Gap Receives Initial Test

Daily Continuation

Discussed yesterday that the market seemed poised to test the gap from the November contract premium and that test occurred yesterday in a mild form. I have heard from many regarding the winter being over and prices are doomed– my memory reminds me of other Decembers when everyone was convinced winter was “over”. I will en devour to review recent history to establish if this comfort in trade is warranted.

Support: $2.425,$2.373, $2.255-$2.176
Minor Support: $2.162
Major Resistance: $$2.74-$2.789, $2.98-$3.05,
Minor Resistance: $2.55, $2.649, $2.798

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Prices Seek to Challenge Nov Gap

Daily Continuous

It seems that the price action wants to challenge the gap at $2.37 from the premium afforded the Nov contract as it took over as prompt in Sept/Oct. That extension should be expected early this week and has started late Sunday night.

January completed a continuation “outside” week lower .  The January contract traded its third straight lower weekly high and then on Thursday closed below the November low.  Volume during the declines was the highest since the first week in August as prompt gas was breaking out higher and the eighth highest in all of 2020.

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Break Down Tests the ’18 and ’17 Q1 Lows

Monthly Continuous

The breakdown that started the week before, gained momentum last week as prices closed just at or below the Q1 ’17 and Q1 ’18 lows. This key area around $2.55 will tell us the near term direction for prices. A further continuation of the declines, a daily close lower, will likely signal a coming test of the gap ($2.37) remaining from the premium associated with the November contract.

Weekly Continuation

Discussed a couple of weeks ago the two bias’ that exist in the market and they both remain. in place. While the declines have been swift a sudden (collapses usually are– whereas bull markets are slow and continuous). The declines can continue all the to $2. and slightly below to maintain the higher low aspect of that previous analysis.

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Prices Give It Up

Daily Continuation

In the Weekly section, I discussed the short /intermediate term cycle is bearish and the market is behaving accordingly. Yesterday, prices confirmed the bearish bias and the market is now in a sell the rally mode. The consolidation pattern of the last few days was waiting for a break out or break down– the breakdown is now in place breaking below, and closing below, the Nov lows.

Support: $2.425,$2.373
Minor Support:
Major Resistance: $2.98-$3.05, $3.091, $3.151, $3.24,
Minor Resistance: $2.74, $2.887

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Bears Garner Enthusiasm

Daily Continuous

Price action garnered the power to break below the recent range trade support levels and taking the price down to the highs from late August ($2.743). The release of CFTC data shows the Managed Money short segment adding to their positions through the report date (Nov 24th). Clearly looks like a bearish bias going into the storage report.

Support: $2.61- $2.621, $2.425,$2.373
Minor Support:$2.743
Major Resistance: $2.98-$3.05, $3.091, $3.151, $3.24,
Minor Resistance:$2.887

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Mini-Range Consolidation Continues

Daily Continuous

Price action continued in the narrow range that has held since the expiration of the Dec contract. This range has been on each side of the gap on the upside discussed last week ( two red lines above). Normal trade has gaps being important associated with breakouts or breakdowns– this one seems to be developing a consolidation range.

Support: $2.82, $2.61- $2.621, $2.425,$2.373
Minor Support:$2.887, $2.785
Major Resistance: $2.98-$3.05, $3.091, $3.151, $3.24,
Minor Resistance:

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Yesterday’s Call All Wet

Daily Continuation

Well — I was off expecting additional tests of support yesterday– instead prices started up and stayed up testing the initial resistance area around $3.00 (after opening above minor resistance area). One would have to believe that the market wants to test that resistance area again (if it is supported by what ever fundamental data is directing these small counter trend rallies). The recent range $3.00-$2.80 remains as the trade range with low risk stops just beyond the boundaries.

Support: $2.82, $2.61- $2.621, $2.425,$2.373
Minor Support:$2.887, $2.785
Major Resistance: $2.98-$3.05, $3.091, $3.151, $3.24,
Minor Resistance:

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Two Trends Within the Market

Weekly Continuous

Going into some technical weeds this week as the market is sending two messages at the same time. The first message that most traders track is the short / intermediate term and the second is the long term analysis which drives potentially more accurate expectations of where the market is headed (bullish or bearish) with out the noise from daily position changes and weather impacts.

Daily Continuation

Discussed last week that the market was bordered by two gaps, one to the upside which was remnants of the collapse two weeks ago on a Monday and the other to the downside, remnants of the premium afforded the November contract which has yet to be closed. The upper gap was closed in nine days as the expiring December contract and January prompt traded in and through late last week (with Dec remaining well bid all through the three days). By failing on Friday after taking over as prompt, the short term interpretation remains bearish after the collapse two weeks ago.

Spot January Contract

The image above shows just how bearish the short term is for the Jan chart as another gap was formed between $3.022 and $3.074 that was not even challenged during the well bid Dec expiration– in fact the 200 day SMA for the Jan contract was resistance below the gap. While last week’s reversal (impressive counter rally) off of the lowest price since last spring, the event occurred on significantly lower volume (holiday week) and declining open interest (expected with expiration).

Clearly, the short / intermediated term market is defined itself as a bearish bias. Longer term the market has suggested that the bias is more neutral to bullish. Look at the chart below which represents the Daily Continuation of prices since the bearish bias developed starting with the declines in Nov ’18 after posting a high of $4.829.

Daily Continuation with High and Low

From those declines (for nearly two years) each rally was a lower high and ware met with a lower low. The exception was the brief rally in the fall of 2019 which had a lower high followed with a higher low. When the trend redeveloped immediately that exception should be considered a counter trend rally.

After the declines on the July expiration (low $1.432), the market has started to initiate a bias change, developing a series of higher highs and higher lows. The initial phase of this change occurred when prices were stronger during the annual weak September to trade above the May ’20 high and broke out from a trading range that had confined successive prompts since January ’20. That strength in August failed to break above the previous Nov high. From there the October contract fell nearly $1.00 before recovering to expire at $2.101. That recovery suggested that market had its first significant higher low since Sept ’18, beginning a bias change. That change would be confirmed with a higher high with the large premium afforded the Nov contract. Six consecutive higher weekly closes took prices above the Aug ’20 and the Nov ’19 highs. From there, the Nov contract settled above the Nov ’19 high and conclusively ending the negative bias.

The market is not going to take off from here but there is significant evidence that hedging strategies based upon the range of prices in 2019 and 2020 may be suspect.

Major Support: $2.61- $2.621, $2.425,$2.373
Minor Support:$2.785
Major Resistance:$2.82-$2.853, $2.887, $2.98-$3.05, $3.091, $3.151, $3.24,
Minor Resistance:

Short Term Declines Should Continue

Daily Continuation
Spot January Contract

As discussed in the Weekly section — the market has developed a negative bias to trade. Before you play that side (read the Weekly Section for longer term positions) look for low risk areas to pursue length in the long term price arena. Look for movements within the recent range ($3.00-$2.70) in the next day or so and look to the market to define longer term impacts.

Major Support: $2.61- $2.621, $2.425,$2.373
Minor Support:
Major Resistance:$2.82-$2.853, $2.887, $2.98-$3.05, $3.091, $3.151, $3.24,
Minor Resistance: