Author: Willis Bennett

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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July Takes Over

Weekly Continuous

June opened the week with a gap lower on Sunday night only to reverse and close the gap — settling at the higher end of the range it had traded most of the month. Once June was off the board, July, which had followed June’s directional movements, gave up the expiration related gain, retreating to retest its gap lower opening. July had begun trading at 2.920, traded to 2.903 and then rallied to 3.046. Thursday’s low at 2.914 along with June’s pre – expiration low daily close (2.886) likely redefines the key support zone. The new prompt recovered again from that support in typical low volume pre – holiday trade to end calendar May at 2.986 after ending April at 2.978 (developing a theme here). All of the Q2 months have traded down to lower levels, but all were also well – bid into expiration. You may recall that last year those Q2 months were far from well-bid after trading earlier lows.

Spot July Contract

The interesting chart is the Spot July contract which shows a higher low after each rally since the low of July last July. Different from the Continuous chart above, the highs in July have continued to be higher than the previous high which is variant to the Continuous price action. While the highs attained last month ($3.15) fulfill the rally of Q2 over Q1 lows (average rally) I am not convinced that that will turn out to be the final Q2 high. The prompt chart suggests that July has not finished its run.

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Price Start Week in a Rally

Daily Continuous

Price action ended the week on a positive note and opened on Sunday night with a solid run, confirmed on late Monday trade. While the continuous chart continues to show a range trade environment, the spot July chart is more constructive (as discussed in the Weekly section). The directional bias for July will be a battle and currently, the price remains near the top of the resistance zone.

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: $3.01-$3.042, $3.12-$3.15, $3.251, $3.31, $3.396

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Resistance on Expiration

Daily Continuation

Jun expired on the higher side of the range and July quickly traded into the June expiration range. There remains a nickle spread between Jun and Jul and would expect a retracement into that range. The July chart looks more supportive than any of the recent monthly charts and will go into that on the weekend. For now — play the range– and have a great weekend as I will not be publishing a Daily on Friday.

Major Support: $2.883, $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: $3.01, $3.12, $3.251, $3.31, $3.396

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Range Trade on Expiration

Daily Continuous

The range trade continued with a slight extension for prices as options expired. The July contract continued to trade between $.06-$.07 premium to the June so now what happens to June may not extend to the July contract. What ever the variance to the June contract it would be wise to expect July to test some part of the expiration range as it takes over as prompt.

Major Support: $2.883, $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: $3.01, $3.12, $3.251, $3.31, $3.396

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