Author: Willis Bennett

Not So Fast Bulls and Bears

Weekly Continuation

Spoke last week about the expectations of a test of support at the zone around $3.68 — well that happened quickly and prices extended into the next support zone in the $3.30s before finding some footing associated with the enormous rally in all the markets (most importantly crude) after the early weakness. Associated with the volatile week was a massive liquidation of open interest, 58,210 contracts on Tuesday alone during the suggesting that there some disappointed longs, which triggered the necessary volume. From there the next area of support mentioned in the Daily was the target between support at $3.250 – $3.300 — the May contract could not fulfill that expectation. After trading as low as $3.336 May reversed higher to close at $3.816 (some would consider a solid reversal). It is not normal technical analysis, but a sudden switch from “risk off” to “risk on” resulting from events unrelated to natural gas was the trigger for the substantial high volume reversal. Crude reversed along with natural gas to trade nearly an $8 range, gold nearly $125, bitcoin nearly $9000 with similar volatile gains in risk assets across the spectrum.

Such events are unpredictable and are usually unwound, but are also often consequential. In the case of gas, the reversal traded with 1,122,556 contracts and further liquidation of 44,450 contracts of open interest as participants with short positions were whipsawed out of the previously falling market. Between the two events (the liquidation of long positions on Tuesday and short positions on Wednesday) total open interest was reduced nearly 100,000 contracts and another 30,000 on Thursday. There are not a lot of comparable wholesale liquidations that match those few days.

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So You Like Volatility

Daily Continuous

As a trader I love volatility and being the chance to take positions — looking for reward. Last week was out of my comfort zone but somewhat profitable. Discuss in detail the events of the week in the Weekly section but suffice to say being short from the previous week’s close was great until Wednesday (thanks for stops). Then price whipped around to destroy the folks that don’t use stops only to destroy the folks who came in long (with crude and other commodities) by sell off more at the end of the week. I am going to label last week as volatility based on non-gas issues and sit on the sidelines until definable risk and reward returns to the gas market.

Major Support: $$3.33, $3.16-$2.97, $2.727, $2.648,
Minor Support :
Major Resistance: $3.628, $3.86, $4.168, $4.461, $4.501, $4.551, $4.746-$4.75, $5.03

Challenging the Lows From Earlier in the Week

Daily Continuous

Prices fell back near the lows from earlier in the week on the storage release. While the market continues to maintain a slightly bullish bias this year — there is clearly a discussion amongst the traders as to the accuracy of that bias. This market could be bought with options or contracts on pull-backs but keep the stops tight until the discussion becomes a statement.

Major Support: $3.60-$3.584, $3.16-$2.97, $2.727, $2.648,
Minor Support :
Major Resistance: $3.86, $4.168, $4.461, $4.501, $4.551, $4.746-$4.75, $5.03

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Rebound?

Daily Continuous

Nothing like an economic rebound and crude rebound to support the gas market. Technical data points indicate a nice daily reversal but be careful with the inputs that brought this to fruition. Taking a day to watch the market may be the best call.

Major Support: $3.60-$3.584, $3.16-$2.97, $2.727, $2.648,
Minor Support : $3.742
Major Resistance: $3.86, $4.168, $4.461, $4.501, $4.551, $4.746-$4.75, $5.03

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Prices Break Below Near Term Support

Daily Continuous

The declines (likely linked to the declines in crude and the US Dollar) may extend further but not sure they will challenge the bias base at $2.99 from earlier in the year. Starting to be oversold so tread lightly on the down side exposure.

Major Support: $3.16-$2.97, $2.727, $2.648,
Minor Support : $3.448
Major Resistance: $3.86, $4.168, $4.461, $4.501, $4.551, $4.746-$4.75, $5.03

Gas Joins the Crude Declines

Daily Continuous

The natural gas market fell prey to the economic declines associated with the crude oil declines of late. The declines tested the lows from the middle of February just above the $3.60 level — now lets watch how much the negative momentum will carry prices.

Major Support: $3.60-$3.584, $3.16-$2.97, $2.727, $2.648,
Minor Support : $3.742
Major Resistance: $3.86, $4.168, $4.461, $4.501, $4.551, $4.746-$4.75, $5.031

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Crude Market in Decline– Gas Remains Range Bound

Weekly Continuous

Beginning its first full week as prompt May, jumped higher but the attempt to trade further into resistance was frustrated by a previously violated short – term trend line. For the third time in three weeks prompt gas traded a weekly reversal, each of those reversals has been traded with diminishing volume suggesting an increasing “uneasy equilibrium”, as prompt gas consolidates ahead of a range expansion…one way or the other.

Prompt gas has been trading between a pair of high volume lows ($3.554 and $3.742) and a pair of high volume highs ($4.476 and $4.551) One exception of the brief spike to the March high, since mid – February . The zone between the two lows (02/18 & 03/03) is very well defined support that has been tested once…on 03/27 when about to expire April traded the March low, $3.689 and simultaneously completed an expected regression to the 20 – week SMA. This week’s poor close, strongly suggests May will retest that support…and an important trend line on the May chart.

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Will Energy Weakness Pressure Gas

Daily Continuous

Crude has hit the edge and fallen, the dollar continues to decline what is left for natural gas—- no clue but early trade suggests that it too will fall under pressure. It will be interesting to watch how traders interpret the world economic events in the near term. Discuss the future price expectation in the Weekly area.

Major Support: $3.60-$3.584, $3.16-$2.97, $2.727, $2.648,
Minor Support : $3.827-$3.801 $3.742
Major Resistance: $4.168, $4.461, $4.501, $4.551, $4.746-$4.75, $5.031

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Quiet and Developing Range

Daily Continuous

No break out or down after the storage release and the price action reflected the non-action by maintaining the recent range — nothing new for tomorrow. Keep the range trading on.

Major Support: $3.60-$3.584, $3.16-$2.97, $2.727, $2.648,
Minor Support : $3.827-$3.801 $3.742
Major Resistance: $4.168, $4.461, $4.501, $4.551, $4.746-$4.75, $5.031

Trying to Define

Daily Continuous

Have been discussing the market trying to establish a base for the next bias direction, either up or down, and is the definition of a technical range trade that will likely hold for the near term.

Major Support: $3.60-$3.584, $3.16-$2.97, $2.727, $2.648,
Minor Support : $3.827-$3.801 $3.742
Major Resistance: $4.00, $4.168, $4.461, $4.501, $4.551, $4.746-$4.75, $5.031