Repeat?

Daily Continuation

Prices acted nearly identical to Monday until the end. Unlike Monday, when there was a rebound off of the stale trade around $2.55, yesterday the market behaved more like I thought it was on Monday, by closing just off the lows and the key support at $2.51. This is the consolidation of the runs during August and it may take prices down into the low $2.40’s during the coming seasonal weakness.

Major Support: $2.51, $2.186, $2.162, $2.089-$2.055, $2.029-$1.937, $1.86, $1.527,
Minor Support: $2.499-$2.468, 2.377, $2.255, $2.102, $1.975
Major Resistance: $2.743-$2.755, $2.809

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Rebounds Off Of Support

Daily Continuous

Expected the decline to support levels but the $2.50 area was minor support (have changed that now), then prices rallied significantly later in the day. Not sure why the late rally, but now prices are challenging that key area where they failed last week (see Weekly analysis). What ever sparked the late day rally — it will need to garner significantly more participants to break through the Island Reversal resistance area.

Major Support: $2.51, $2.186, $2.162, $2.089-$2.055, $2.029-$1.937, $1.86, $1.527,
Minor Support: $$2.621-$2.598, $2.499-$2.468, 2.377, $2.255, $2.102, $1.975
Major Resistance: $2.743-$2.755, $2.809

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Failure At Key Resistance

Daily Continuous

The price run for the new prompt failed at the key resistance dating back to last Nov. Recall how prices reversed off the high and opened with a small gap (now $2.743-$2.755) and that gap formed the Island Reversal suggesting that prices were headed down. Oddly, that gap was not closed on Friday, in spite of the premium handed to the Oct contract as prompt. This (resistance) should be a key area for prices in the near term as we head into one of the weakest periods of the year for natural gas prices. I would expect prices to retrace into the expiration zone for Sept gas (perhaps a nickel above or below $2.50) during the holiday period short of some fundamental event occurring.

Major Support: $2.186, $2.162, $2.089-$2.055, $2.029-$1.937, $1.86, $1.527,
Minor Support: $$2.621-$2.598, $2.51, $2.499-$2.468, 2.377, $2.255, $2.102, $1.975
Major Resistance: $2.743-$2.755, $2.809

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A Friday With Consolidation

Weekly Continuation

Some noteworthy events occurred last week with the expiration of the Sept contract. Expiring at 2.579 (highest settlement since last Nov), the 2020 Sept contract jolined three other years in the last twenty years to remain well bid into expiration. The historical trend is for weakness to carry the market during the Sept expiration due to its proximity to the Labor Day holiday. In each of those three prior, Sep contracts that were well bid were, in ’02 a reversal from the Q3 ’02 low confirmed an uptrend that did not culminate until a Feb ’03 spike above $11.00. The second year was in ’05 and hurricane drama events took prices on to a December spike to over $15.00. The third year was in August ’13 when a bounce off of the Q3 low did not end until the following February (very similar to ’02). Due to the similarities to historical events it may be prudent for traders and hedgers to understand that with natural gas price movements sometime rhymes.

Weekly Continuation with RSI

Have been discussing the last couple of weeks, the need for extended bull markets to “feed the bull”. This event is confirmed with gaining open interest on higher volume. While prompt gas has closed higher for four consecutive weeks, volume has steadily declined and open interest has continued to decline over the period with short positions having to cover. These two events occurring will not support an ever increasing price level.

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Powerful Close

Daily Continuation

Stronger close than I was expecting, but this market is just running along with little or no serious consolidation periods. Not sure if it will continue, but I am still expecting a period of consolidation taking prices down to $.20-$.30. The upcoming period of the year (Labor Day period) has been one of the weakest of the year historically. Should prices not conform to the period’s history — then it is likely we are headed significantly higher. The gains of the last few days have occurred on lower volume and declining open interest (not surprising with contract expiration) which is not supportive of building a base for extended rallies. Weekly RSI (lagging momentum indicator) is approaching extreme over bought levels and the weekly Bollinger Band study remains nearly 3 standard deviations over the 20 WK SMA (not sustainable over time). Be aware over the next week.

Major Support: $2.162, $2.089-$2.055, $2.029-$1.937, $1.86, $1.527,
Minor Support: $$2.54-$2.51, $2.499-$2.43, 2.377, $2.255, $2.102, $1.975
Major Resistance:$2.588, $2.709, $2.74, $2.809

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Quiet Expiration as Fundamentals Offset

Daily Continuation

Flipped the price chart over to the Oct contract for the continuous chart. The declines that were expected are occurring but would expect more to close the premium between the Oct and Sept contracts. Prices will all depend on the situation / positions during the expiration process. The fundamental trade will continue to struggle between the ending inventory levels and the current storage levels (projected forward) that is why I will let the fundamental folks define the technical behavior.

Major Support: $2.162, $2.089-$2.055, $2.029-$1.937, $1.86, $1.527,
Minor Support: $$2.499-$2.43, 2.377, $2.255, $2.102, $1.975, $1.719
Major Resistance:$2.51-$2.54, $2.588, $2.709

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Snoozing, Likely to Change

Daily Continuous

Would not expect the quiet day trade of yesterday to continue through expiration. We have options expiration today and then the contract (storage) on Thursday — love it when that happens. Would expect $2.50-$2.60 in play for expiring calls — the put contracts may not get exciting until $2.25. Go back to what I mentioned in the Weekly that the seasonal weakness (week either side of Labor Day) is one of the weakest of the year and if prices don’t go down during this period they are going up.

Major Support: $2.162, $2.089-$2.055, $2.029-$1.937, $1.86, $1.527,
Minor Support: $$2.499-$2.43, 2.377, $2.255, $2.102, $1.975, $1.719
Major Resistance:$2.51-$2.54, $2.588, $2.709

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Prices Approaching Key Period

Daily Continuous

That is why I maintain hedges as prices ignored what the technical data suggested and went opposite, reversing off of early declines to finish higher. Now we are looking at a key struggle, as the market has a influence of The expectation is that prices should weaken this week — but if they don’t I think the weekly section sums it up well.

Major Support: $2.162, $2.089-$2.055, $2.029-$1.937, $1.86, $1.527,
Minor Support: $2.377, $2.255, $2.102, $1.975, $1.719
Major Resistance:$2.43-$2.499

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Impressive Close

Weekly Continuous

Suggested in the Daily last Friday, that against the technical instincts that the market showed, it may rally against the consolidation for prices, similar to the week prior and decline. Sure enough, prices started weaker, per the expectations, only to take off on a nice outside daily reversal pattern, finishing near the highs of the day.

With that said, it should be noted that the rally has taken prices near a zone, commencing at $2.50 up to $2.60 that has held the market consistently over the last few years. During last year’s run to the Q4 high there have been only four closes above it, all during the run in Nov ’19.

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Now We’re Talking

Daily Continuous

So we discussed yesterday that it looked like the market need to take a breath– hey it did. Last week, at this time, the suggestion was made that perhaps more consolidation should occur– what happen– the market trashed my thoughts with a big move higher. I will submit the same analysis as last Friday, that the move in gas need to continue to test support zones from which to build a base to send prices higher. However, this week there was a slight hedge with some calls– just in case kids want to play.

Major Support: $2.162, $2.089-$2.055, $2.029-$1.937, $1.86, $1.527,
Minor Support: $2.377, $2.255, $2.102, $1.975, $1.719
Major Resistance:$2.43-$2.499

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