Author: Willis Bennett

Another Attempt

Daily Continuous

Yet another attempt to close above the gap and confirm the action with a close above was met with failure. Perhaps that will happen during the expiration but continue to expect a challenge of either the gap area ($3.08 now) with the Dec contract (whether it is closed above that area as Nov expires) as it takes over as prompt.

Major Support: $2.822, $2.71,$2.476-$2.446, $2.392,$2.258-$2.253, $2.219
Minor Support:$2.783, $2.638, $2.508, $2.339
Major Resistance: $3.047-$3.053, $3.101, $3.19

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A Reversal Towards the End of the Week

Daily Continuous

Last week provided a great opportunity to learn about gaps as I discussed in the Weekly Section on Wednesday… It is important to realize that the gap closes, but it is critical that the market confirm that by a daily close beyond and even more important, from an enforcement standpoint, to have a weekly close beyond the gap. Neither occurred last week and we witnessed the market reject the gap closing as the week went on. I want to thank the folks who sent me emails regarding the accuracy of the Weekly update and hope it was a profitable event.

Added to the discussion about the market going into expiration and how the market looks like from a technical standpoint in the Weekly section and will not restate what is already written. Prices have three days left of the November contract and there is still 21,000 contracts open (historically a little high) so there may be some additional volatility. My interpretation of the market remains the same as stated in the Weekly last week– expect the Dec contract to weaken toward the gap area ($3.066) in the coming week. Where Nov goes is anyone’s guess- it may chase Dec but I have to believe there are some option positions around $3.00 that may or may not have been closed last week, ensuring the potential volatility.

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Expectations Being Met

Weekly Continuation

As discussed in the Daily and the Mid Week updates, closing that gap from ’19 was important and unexpected during the Nov tenure as prompt. Had a stronger indication that the gap would be traded above when the Dec contract takes over this coming Thursday (thereby gaping above the old gap), followed by the Dec prompt retracing and actually filling the gap. All of those expectations were thrown out as Nov closed gap on a Daily basis, but could not confirm the legitimacy of the strength buy closing the week above the gap. Instead, prices weakened and closed the week below the gap area (seen below).

The Gap in Daily Continuous – Back to 2019

Technical behavior interprets higher weekly closes and breakouts through well – defined resistance (held the market since 2019) are bullish indications that a market intends to continue higher. Unfortunately, the breakout to a new high was not supported in the immediate or differed contracts, November was the only contract of the next nine to record a weekly gain. A highlighted earlier, technical orthodoxy requires confirmation, perhaps it runs a little more during the three expiration, but I would expect December to continue to weaken as highlighted last week. 

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Now What Happens

The market continued higher during the trade day only to weaken towards the end and close the day at the low side of the gap range. Mentioned earlier in the week, play the range and keep the stops tight. Need to see how this plays out today– may make several technical event today.

Major Support: $2.983, $2.476-$2.446, $2.392,$2.258-$2.253, $2.219
Minor Support:$2.79, $2.638, $2.508, $2.339
Major Resistance: $3.047-$3.053, $3.101, $3.207

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Gap in Daily Closes – Meaning

2 Year Daily Continuation
Weekly Continuation

I did not think that the gap in the Daily Chart would be filled during November trade (pink line above), but like other events I am wrong. There was never a doubt that the gap would be filled (that’s because Dec was trading north of the gap at $3.34), but filling it with November has some implications. As mentioned in the Daily, the fact the gap was closed is important but prices did not close the day above that gap ($3.047), which leaves it unconfirmed. More importantly, when the market closes above (the Nov or Dec contract) the level around $3.00-$3.04 it will then become support (what was resistance becomes support) for a potential extended period of time. That said, should Nov remain above this area, expect Dec to at least test the zone during its tenure. The longer the zone remains support it may be the base for a period of weeks.

This rally has been based on some sort of fundamental driver and should that driver be mitigated then prices may trade around this area or below for a few sessions and possibly into and through expiration. If the driver remains and this area become support then its a new world for the near term and you have to look at higher prices for resistance because a floor has been established.

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Gap is Closed in Early Trade – Not Confirmed at Close

Daily Continuous

Price surprised me as they closed the gap going back to 2019 that sets up a new world (see Weekly section). Key to remember that the market did not close the session above the gap (technical technicality) and therefore has to be questioned. Seems like a good area to sell with stops just above as a low risk area if you are so inclined, but be careful with Dec as it showed some strength but did not join Nov in a new high which brings a certain amount of doubt to the whole daily move.

Major Support: $2.476-$2.446, $2.392,$2.258-$2.253, $2.219
Minor Support:$2.79, $2.638, $2.508, $2.339
Major Resistance: $3.047-$3.053, $3.101, $3.207

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Prices Remain Firm

Daily Continuation

First off, I want to thank those that responded to my email yesterday. I know you are all busy but I wanted to get a sense of the technical knowledge of how important the gap, discussed yesterday, is to the NYMEX price for the next few weeks. Due to the responses, I will go into it’s importance in more detail on the weekend with the Weekly report. Until then, that gap remains significant resistance. Noticed that the gains were not met by the differed contracts as Dec came close to a new high, but fell short, while the spread between the prompt contract and differed narrowed. Trade the range but keep the stops close on selling this rally. Not sure if this rally has enough support to close the gap, but the varied participants participating in this commodity trade, give me pause.

Major Support: $2.476-$2.446, $2.392,$2.258-$2.253, $2.219
Minor Support:$2.79, $2.618, $2.508, $2.339
Major Resistance: $2.908-$2.928,$2.973-$3.00, $3.047

Is It going to Challenge the Gap?

Daily Continuous

Have not discussed the gap that exists to the upside ($2.983-$3.047) that remains in the Daily chart from Jan ’19, because there as not the momentum for a serious challenge. Yesterday gave me pause for thought as a down day had a serious daily reversal. After opening and trading lower on the open, the market reversed and closed up on the day. Volume was a little higher than recent but the activity at the end of the day caught my attention. Respect the range the market has held but keep the stops close.

Major Support: $2.476-$2.446, $2.392,$2.258-$2.253, $2.219
Minor Support:$2.79, $2.618, $2.508, $2.339
Major Resistance: $2.908-$2.928,$2.973-$3.00, $3.047

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Prices Decline Late Friday Maintaining Losses on Sunday

Daily Continuous

Prices continued lower from the end of Friday on the open Sunday night. There seems to be a mini-range developed between $2.61 and $2.85 for the last few days. Would play that range with stops just on the other side depending on which way you are playing. Went into expectations of the next few days leading into expiration, in the Weekly area. The differed winter contracts continue to show buying regardless (to a degree) of the prompt action.

Major Support: $2.476-$2.446, $2.392,$2.258-$2.253, $2.219
Minor Support: $2.618, $2.508, $2.339
Major Resistance: $2.789-$2.801,$2.908-$2.928,$2.973-$3.00

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September High for November Remains

Weekly Continuous

The high for November gas printed just over $3.00 in early September and while last week provided a marginal attempt to get back to that level, the rally failed reversing and closing near the lows (in fact after the regular session was finished the late afternoon traded much lower). The late declines took prices to close just about on the 10 week SMA. The week’s action occurred on lighter volume and declining open interest (highest volume on the declines).

Since prior to the beginning of November’s tenure as prompt it has presented a volatile trading range (basically +/-$2.40 – $2.90). Trade gave up the a significant portion of the substantial premium awarded at October expiration. Action then had November trading through its September low (and its 200 – day SMA) before regaining that SMA, and significantly more, when it traded to a higher continuation high at $2.955. This failure at both of the extremes suggests that the volatile range will continue through the remainder of the November contract. This price behavior will mimic other years when there has been such a significant premium.

Monthly Continuation

While the Nov contract has traded in a volatile range ($+.55) this month the differed contracts have not provided the same level of volatility. December traded within a +$.35 range since the expiration of the Oct contract and similar narrower ranges occurred in the other winter differed contracts. I will be going into the open interest and volume of the differed contracts during the week so be sure to check.

Major Support: $2.476-$2.446, $2.392,$2.258-$2.253, $2.219
Minor Support: $2.618, $2.508, $2.339
Major Resistance: $2.789-$2.801,$2.908-$2.928,$2.973-$3.00