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Author: Willis Bennett
Prices Rebound and Look to Test Resistance
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Shocking –Weakness on First Day
Expiration Within Expectations
Just a reminder — this will be the last week that the Daily will arrive in your email unless you subscribe to the website. Effective May 1, you will have to subscribe to the website to receive the Daily. This market seems to be forming a bias change and ecomenergy will be leading the analysis during the transition.
The May contract expired at the high end of my expectations discussed on Monday ($1.61-$1.833) at $1.794. This was after two days of $.22 and $.25 daily ranges — whats that all about. My thoughts were that prices in June prompt would try to close with May’s prices but it is at the high end of the range that has held resistance for an extended period of time. Perhaps prices will collapse down into the support zone from May and April, or as the differed price action has indicated, future strength will control the market. The expiration of May at the high end and the strong differential to June needs to be addressed near term.
Major Support: $1.611, $1.555-$1.519
Minor Support: $1.78-$1.765
Major Resistance: $1.993-$2.025, $2.062,$2.08-$2.102
Minor Resistance: $1.968
Interesting Options Expiration
When I wrote yesterday’s Daily Call I did not expect the range for expiration of the May contract to be the range of day before expiration (options expiration). Noticing the trade early in the day, I was startled with the severity of the declines and the potential for expiration below that of April’s expiration. A cup of coffee later, the market rebounded a dime and continued the rally to the high side of my aforementioned expiration range. Currently, there is little insight as to how and where expiration occurs. The May contract has traded only a dime discount to the June contract which represents a significant reduction in the spread. As a trader, I will take a step back to watch for the expiration today, referring back to a series of comments over the last couple of weeks regarding the importance of this expiration.
Major Support: $1.611, $1.555-$1.519
Minor Support: $1.78-$1.765
Major Resistance: $1.993-$2.025, $2.062,$2.08-$2.102
Minor Resistance: $1.968
Going Forward
A series of close weekly closing prices have occurred during the May contract as prompt. Closing prices have been within a range of $.02 over the last three weeks ($1.733, $1.753 and $1.746). The two previous weeks were at $1.634 and $1.621. This type of price behavior usually precedes a significant price move as it has a tendency to bring attention to traders (yes we look at these elements in trade). In natural gas the last time this type of tight weekly closings was in December when there were four weekly closings ($2.281-$2.334) before prices before prices broke down and added to the recent Q1 declines. The previous tight weekly closes occurred last summer when prices constructed a tight weekly range between $2.119 and $2.169 over three weeks (July and August). This set up the rally to the September high ($2.71) and the eventual Q4 high of $2.905. I will be getting into the expectations of the June contract, as prompt, during this week with the final outlook next Sunday.
May Expiration Continues Weakly
Just a reminder — this will be the last week that the Daily will arrive in your email unless you subscribe to the website. Effective May 1, you will have to subscribe to the website to receive the Daily. This market seems to be forming a bias change and ecomenergy will be leading the analysis during the transition.
Prices closed the week just about where they started ($1.746 vs $1.753) the week after providing a solid rally to test resistance from the Feb and March highs ($2.025-$1.998) only to fail once again as discussed in the Daily last week. Only a couple of trading days remain in the May contract, and I would bet on a settlement between $1.61-$1.833.
Major Support: $1.611, $1.555-$1.519
Minor Support: $1.78-$1.765
Major Resistance: $1.993-$2.025, $2.062,$2.08-$2.102
Minor Resistance: $1.968
Traders May Be Giving Up on May
Just a reminder — this will be the last week that the Daily will arrive in your email unless you subscribe to the website. Effective May 1, you will have to subscribe to the website to receive the Daily. This market seems to be forming a bias change and ecomenergy will be leading the analysis during the transition.
The market failed again to break above the key resistance on the storage report and it looks like the trade has give up on the May contract as the June contract traded back out to $.13. It looks like May will fall subject to positioning going into expiration next Tuesday. As mentioned a while ago on this website — the key to prices into the summer was going to be how expiration of May behaved and the differential to June. Will keep you posted.
Major Support: $1.611, $1.555-$1.519
Minor Support: $1.83, $1.78-$1.765
Major Resistance: $1.993-$2.025, $2.062,$2.08-$2.102
Minor Resistance: $1.968
The Latest Variance
Just another variance yesterday as prices continue to treat this rally a little different than previous rallies. Over the last two months, after there was a failure at resistance the market could not move fast enough to test support as sellers rushed in. Yesterday (and the previous day), the market had every opportunity to facilitate the same behavior. Instead, prices found a bid and are now attempting to attack the same resistance zone around $2.00 that has held the market since January. This attack is already different than previous runs, it may have the same outcome as previous runs or it will redetermine the market for the upcoming summer.
Major Support: $1.611, $1.555-$1.519
Minor Support: $1.83, $1.78-$1.765
Major Resistance: $1.993-$2.025, $2.062,$2.08-$2.102
Minor Resistance: $1.968
Range Holds for Now
Prices could not break out above the critical resistance area short of $2.00. It is clear that there is an issue with the market, as a break above this zone will have ramifications for the remainder of 2020. Play the range, as recommended here for the last few weeks, but keep an eye on the June contract for reference (per my Daily yesterday).
Major Support: $1.611, $1.555-$1.519
Minor Support: $1.83, $1.78-$1.765
Major Resistance: $1.993-$2.025, $2.062,$2.08-$2.102
Minor Resistance: $1.968