Author: Willis Bennett

Friday’s Trade Speaks Loudly

Daily Continuous

Was not expecting a break out upward on a Friday– but when prices bounced off the 40 week SMA in the Sept contract the party started. It should be expected that with the reduction of short positions and the hurt feeling associated with the rally event — dips will be bought. Key areas for the dips are $2.28, $2.16 and if it gets back there, $2.055.

Major Support: $2.162, $2.089-$2.055, $2.029-$1.937, $1.86, $1.527,
Minor Support: $2.255, $2.102, $1.975, $1.719
Major Resistance:$2.377-$2.397,$2.43-$2.499
Minor Resistance:

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Momentum Builds

Weekly Continuous

 Following the largest one week gain since the end of the run to the November ’18 Q4 high, the September contract extended the gains another .118/d, to close the week at the highest weekly close since 11/22/19. Expecting a building resistance just above $2.25 and the likelihood of correction back to substantial support, never occurred but buying commencing at the 40 – week SMA of September gas (followed by the hedge funds) ended the potential for lower offers.  The price rebound during the week extended into the close, with higher volume and gains in open interest and a close above the historically important January high is an indication that the September contract will continue to push further before expiration.  The August, September, October, November ’19, April and May ’20 highs of September gas all traded between 2.410 and 2.499 which could be expected as the destination for the recent gains.

Monthly Continuous

While negative price action seems remote, prices will be testing the zone from $2.28-$2.25 and the area around $2.16 before expiration in all likelihood. Testing those areas are not as important as what happens to prices while testing that area.

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Storage Report Has Little Impact

Daily Continuation

Was expecting more of a test of support with a slightly bearish report. Instead, prices rallied at the end of the day. Perhaps this is the new range $2.08-$2.28 but I believe that there will be another test of support before the expiration, but this expectation is solely based upon the historical trend of prices during this time of year. Am not suggesting that the $2.05 level will break down, rather that the highs for the September contract are likely established and the lows between $2.02-$2.055 will hold going into expiration.

Major Support: $2.055, $2.029-$1.937, $1.86, $1.527, $1.484-$1.44, $1.336
Minor Support: $2.102, $1.975, $1.719
Major Resistance: $2.255-$2.284, $2.377-$2.397,$2.43
Minor Resistance:

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Initial Test of Support

Daily Continuous

Declining below minor support, the declines fell short of first initial major support at $2.055 (50% retracement of last week’ gains) and found buyers at $2.085. That is a good start, not convinced that the declines will stop there forming the lower end of the new range. The only reason for suggesting that potential is the seasonal weakness normally associated with the upcoming Labor Day holiday. This period, historically, is one of the weakest periods of the year for natural gas. This trade year though has not followed historical norms with the q2 high in early May and the Q3 low in late June (not even in the q3) so I may have to discount the impact of the seasons. Storage report today which should give us further indications of bias for the week.

Major Support: $2.055, $2.029-$1.937, $1.86, $1.527, $1.484-$1.44, $1.336
Minor Support: $2.102, $1.975, $1.719
Major Resistance: $2.255-$2.284, $2.377-$2.397,$2.43
Minor Resistance:

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Prices Churn

Daily Continuous

Apologies first off wrote the Daily only not to set up the software properly to publish. Prices just jockeyed yesterday as the trade was evaluating near term direction. Judging from the trade early today- it is testing additional support zones as discussed here. The market needs this testing and establishment of the new support and resistance zones – the high end near term was well defined last week at $2.28 — it looks like the low side will be determined this week.

Major Support: $2.055, $2.029-$1.937, $1.86, $1.527, $1.484-$1.44, $1.336
Minor Support: $2.102, $1.975, $1.719
Major Resistance: $2.255, $2.377-$2.397,$2.43
Minor Resistance:

The Bias Change Confirmed

Weekly Continuous

Mentioned in last week’s blog, a key for near term bias change was a weekly close above the trend line off of the Nov ’19 highs and the May ’20 highs. The market opened above that trend line, then advanced through the resistance associated with the 40 Week SMA (had only closed above that during the Q4 rally 4 times and had not closed above since Feb ’19), and some of the shorts were forced to cover. The CFTC trader’s report noted that the shorts covered 45,839 positions through Tuesday of last week. I would submit that the majority of those occurred on Monday and Tuesday.

Monthly Continuous

Prices then extended the gains, breaking the monthly trend line and formed the highest monthly price in seven months. These events left the market over extended to the upside, with the Weekly trading 3 standard deviations over the 20 Week SMA with the RSI momentum indicator racing to the extreme over bought level. This was achieved on high (but not exceptional) weekly volume and declining open interest (fueled by short covering). It should be stated, again on this website, that rallies based solely on short covering are not long for this world. We saw that last winter and again in May when the shorts stopped the action, prices retraced quickly. Due to this history, this analyst was startled that the bias remained positive for the rest of the week’s trade.

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Running Low on Food – Perhaps

Daily Continuous

It seems that the food feeding this bullish bias may be running low. As discussed in the Weekly- bull runs need to continue to feed the bull with open interest gaining while prices run. Last week, the gains were primarily from shorts covering and nervous hedging by consumers after certain resistance levels fell by the way side. It left prices extended and now the market needs to digest the gains with some consolidation– allowing folks to institute new length. Unlike the collapse after the rally in May– the strength prices maintained through the week should not be discounted. Perhaps we are entering a period of buying dips.

Major Support: $2.055, $2.029-$1.937, $1.86, $1.527, $1.484-$1.44, $1.336
Minor Support: $2.167, $2.102, $1.975, $1.719
Major Resistance: $2.255, $2.377-$2.397,$2.43
Minor Resistance:

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Consolidation of the Gains

Daily Continuous

Prices backed off the recent run after the open, then rallied just after the storage release, only to retrace into the close. This type of price action was to be expected (suggested) after the short covering was finished. The limits of short covering is explained with the reduction in volume (daily but will be huge for the week) and now the market needs to prove that the rally has “legs”. A retracement of prices back to $2.10-$2.05 and then finding support will be helpful in defining how strong the foundation of this rally will be heading into a historically weak period for prices seasonally.

Major Support: $1.893,-$1.86, $1.527, $1.484-$1.44, $1.336
Minor Support: $2.167, $2.102, $2.055, $1.975, $1.719
Major Resistance: $2.255, $2.43
Minor Resistance:

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Slow Down in the Gains

Daily Continuous

Prices tried to rally up another $.06 before running into selling at resistance from the Jan ’20 high at $2.255. From there, consolidation started and price broke down to the high teens before the close. Would continue to expect some consolidation of the run this week and we do have a storage report to work with.

Major Support: $1.893,-$1.86, $1.527, $1.484-$1.44, $1.336
Minor Support: $2.167, $2.102, $2.055, $1.975, $1.719
Major Resistance: $2.255, $2.43
Minor Resistance:

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Extension Higher

Daily Continuous

Unlike May, when prices rallied on the pipeline break only to retrace the next day, yesterday’s action showed an extension of the gains from Monday. The recent strength in prices may not be going away, but we will see. Momentum indicators, short term, are reaching over-bought levels but longer term are not there yet. Yesterday’s low, early morning low, reached 38% retracement of the Monday gains, but found buyers. That area will now become minor support.

Major Support: $1.893,-$1.86, $1.527, $1.484-$1.44, $1.336
Minor Support: $2.102, $2.055, $1.975, $1.719
Major Resistance: $2.255, $2.43
Minor Resistance:$2.164

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