Author: Willis Bennett

Unexpected Pop

Daily Continuous

Wasn’t expecting that kind of pop in prices, regardless of the history of the June contract rising into weakness around the Memorial Day holiday. Some of my Candlestick traders tried to explain why but they are well above my knowledge of Candlestick patterns (beyond Doji patterns) and therefore I will not bore you with the details. Facts are the June caught a bid after a terrible trade last week. Guess where we are — yup- right in the range trade that has worked for the last few months. Play accordingly.

Major Support: $1.611-$1.59, $1.555-$1.519
Minor Support: $1.649
Major Resistance: $1.82-$1.849, $1.873, $1.90
Minor Resistance: $2.029

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Minor Bounce Off of Support Test

Daily Continuous
Spot June Contract

Got to the internet to update but not a lot to explain other than range trading and from early Sunday trade, prices want to move higher. Doubt it will last long as the rallies are still selling opportunities. Still concerned about the limitations of trading discussed in the web site regarding the trading house. Play the range — but be advised — the trading house closing the potential of trading the prompt (10 days in advance of expiration) is very disturbing to this trader.

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Trend Line Destruction Takes Prices to Test Major Support

Weekly Continuation

Prices broke through the support tend line and look like additional tests of support down to the range from $1.59-$1.51 seems to be imminent before the upcoming expiration. I find it interesting that one trading house limited all trade associated with the June contract to closing positions. The only time I have seen this type of limiting event happen was on the close of the May Crude contract. Not sure what this means, but there is clearly concern for the potential of volatility. Speculative shorts on the break below trend support allowed for additional positions as they add an additional 36,000 contracts expecting lower prices during the summer. This analysis has supported from the narrowing in the spreads between the summer prompt and winter contracts.

Monthly Continuation

Longer term analysis brings nothing to the supportive table and also suggests additional declines coming, but shows no type of breakdown potential that will break the earlier lows at $1.519. This is still a range trade environment that seems to be heading to the low side of the range. Last week’s decline occurred with gains in volume and open interest, discussed above surely suggesting additional declines coming. While the prices look bleak There is still the potential for the Q2 high to respond higher than the early May gains.

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Prices Find Support

Daily Continuous

That was a rebound off of the last week of selling, have little explanation other than for the last three months the price action has followed a similar range game. Test the resistance (fail) then go down and test the support (fail) so we find our market in the range trade game. It can be lucrative but patience is required. A note for you fine subscribers– it is likely that there will be no Daily on Monday. The goal is to due the longer term analysis tomorrow when the market closes. Be sure to check into the website for those insights.

Major Support: $1.611-$1.59, $1.555-$1.519
Minor Support: $1.649
Major Resistance: $1.82-$1.849, $1.873, $1.90
Minor Resistance: $2.029

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Trend Line Violation Opens Door For Declines

Daily Continuous
Spot June Contract

Once the trend line in the Weekly (see Web) and the spot June, the trap door was open, and some liquidation occurred. We may be similar in trade to 2016 which had an uncommonly early May Q2 high, but with the volume being rather anemic for this type of activity do not believe the high is in so close to the establishment of the Q1 low (just six weeks earlier). The trade does look like it wants to go down and test the expiration range low from the May expiration at $1.59. Would expect the area between the March low of the June contract ($1.649) and the previous mentioned low, to find some buying interest.

Major Support: $1.649-$1.611-$1.59, $1.555-$1.519
Minor Support:
Major Resistance: $1.82-$1.849, $1.873, $1.90
Minor Resistance: $2.029

Great Opportunity – No Follow Through

Daily Continuous
June Spot Contract

The market lost a wonderful chance to break through the support provided by the expiration of the May contract around $1.80. Perhaps it will occur today or Wednesday but I would expect it in the near term. The June contract has now closed below the trend line off of the early April and late April lows for two consecutive days. If a break below is to happen, now is the best time. Continue to trade the range the market is providing.

Major Support: $1.82, $1.611, $1.555-$1.519
Minor Support: $1.794, $1.78-$1.765
Major Resistance: $2.062,$2.08-$2.102–$2.108,$2.139-$2.16, $2.255
Minor Resistance: $2.029

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Extension Downward –Testing Trend Line Support

Daily Continuous
Spot June Contract

In a matter of four days, natural gas prices tested the 200 day SMA for both the continuous and spot June only to succumb to selling pressure taking prices down to trend line support of the lows in the prompt contract. From a trading perspective (understanding that the market is still in a range trade environment) you don’t get these opportunities very often. With close on the lows Friday, one would expect additional declines to the previous range game between $1.59 and $2.00. It is unfortunate that price could not garner enough support between $1.91 and $2.02 to effectively flip the bias. All I can say is patience.

Major Support: $1.82, $1.611, $1.555-$1.519
Minor Support: $1.794, $1.78-$1.765
Major Resistance: $2.062,$2.08-$2.102–$2.108,$2.139-$2.16, $2.255
Minor Resistance: $2.029

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Strong Reversal Off of 200 Day

Weekly Continuous

What can you say about a market that test the 200 day SMA and the 40 week SMA all on the same day and then promptly reverses lower to close the week with a lower low breaking the recent trend activity. I can tell you one thing you can’t say is bullish. That being said, each progressive day the declines were on lighter volume — not exactly the bearish indication that bearish folks would want to witness. Through Tuesday (the latest CFTC report on Friday) showed additional speculative fund covering positions and open interest was down for the week (very slightly). I had seen the press that funds had come in on the declines, which, from the data is not supportive of that type of claim.

Monthly Continuous

From the longer term perspective — the next few weeks will be important to witness and trade. Still in the old range (in spite of the expansion last week) and the market seems to be looking for fundamental information to propel higher or break below the major support. I was interested in the break above resistance but it was on short covering and not sustainable (as discussed here last Thursday). Would prefer a break out on higher volume and gains in open interest to confirm a bias change. Until that confluence of events occur- it is probably economically wise to work the range.

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Additional Declines – No Dip Buyers Yet

Daily Continuous

Not surprising to find additional declines post the storage report. The volume the last two day has been lighter on the declines than the short covering run early in the week, which should be expected. Perhaps the market is testing support and consolidating the gains made earlier in the week, but in reality the prompt is where it was post May expiration. Lots of volatility and no clear directional bias.

Major Support: $1.82, $1.611, $1.555-$1.519
Minor Support: $1.794, $1.78-$1.765
Major Resistance: $2.062,$2.08-$2.102–$2.108,$2.139-$2.16, $2.255
Minor Resistance:

Short Covering Rallies Promote Volatility

Daily Continuous

Over the years, many of you have heard me discuss short covering rallies, and how they end up. Tuesday is a perfect example, as the rally in gas ran up to key resistance and lost its mojo — all while total open interest declined. That is a pure definition of a short covering rally. Due to lack of buying from longer term interests, when the shorts cleared it opened the potential for profit taking and position re-assessment, which is what we got yesterday. I was startled that the $2.029 area did not find more buyers as that was near term support. The dip buyers didn’t show up until the market chased Monday’s lows. These types of $.10-$.15 daily swings may be on the way as the market redefines its directional bias. Keep you eyes on the Winter Strip and Calendar 2021 as they will hold the key for long term directional bias and not the prompt month whose directional movements are related more to daily fundamental data (pipeline issues and positioning for upcoming storage expectations). While prompt was clocked losing nearly $.20 the winter declined 25% of that. A note for traders, the Dec -20 contract is having a hard time at $3.00, keep an eye on that– trade the range but watch for any break on that contract.

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