Author: Willis Bennett

Price Action Closes Above Key Averages

Weekly Continuous

For several weeks the possibility/likelihood of a short covering rally similar to the December/early January rally has been discussed here. This past week’s trade is what a short covering rally looks like. The surprise was that open interest actually increased from Thursday through Thursday (remember that reporting of open interest statistics lags one day). Remember that when a contract is bought to “cover” one previously sold short open interest is reduced by one contract. Rather than falling, the total increased by 519 contracts and if the exchange’s estimate for Friday is anywhere accurate that total was reduced by 287 contracts…an addition of 232 contracts over six trading days when prompt gas gained $.325 on a daily closing basis. This would lead to the logical conclusion that at least an equal number of new contracts were bought to those bought to cover an existing short position…that combination of buying pushed the bid steadily higher, and is when all is said and done, a technical positive.

From its contract low on 04/15 $1.907, June gas has rallied .747 or 39%. The rally from mid – April through Friday’s close is the largest increase in a prompt June contract of the last ten years, but only slightly larger than the ’23 rally ($.654, 32.2%) that peaked at $2.685 on 05/19. As surprising as the extent of the rally from the May low may be, it is still not all that different from a year ago.

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Bias Has Changed

Daily Continuous

Not sure if you caught the theme of the Daily’s last week, but the market seems to be signalling a change in bias. Go into some of the supporting details in the Weekly section, but suffice to say, gas may be heading into a bullish period at a historically bullish season of the year. This does not mean straight up as some of the short covering has already occurred (see Weekly) and the Memorial holiday usually provide some weakness, should you be interested in participating.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.46, $2.67, $2.844

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Closing Expiration Gap

Daily Continuation

Been discussing the high side resistance being the expiration gap from the Feb expiration- and now it closed yesterday. From here you will notice the 200 day SMA just above yesterday’s highs– it should provide some resistance. A break above that level and there may be some momentum to take prices higher as there is likely to be some associated short covering. To the downside will be the storage release –possibly pressuring price rallies.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.168-$2.411 (gap), $2.46, $2.67

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Short Term Range Happening

Daily Continuation

It’s only a couple of days since last week– but there seems to be a mini-range developing in the June trade between $2.20 – $2.40. Continue to play that until the market tells you that is over.

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Gap Inches Smaller

Daily Continuous

Yesterday brought on some gains that lessened the gap from earlier in the year, trading to a high of $2.377 at the end of the day’s trade. Spoke about closing the gap perhaps this week — all I can say now is that if it doesn’t close this week – its going to miss a great opportunity. Having a gap with this much space can make the process slow and piece by piece.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.168-$2.411 (gap),

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Consolidation Begets Small Rally

Weekly Continuation

The consolidation pattern that permeated the market for the last two months (with slight advances) has developed a solid base for the summer. June reversed higher from support and ended the week strong (above the March/April highs, the continuation 20 – week SMA (for the first time since the January high and the historically important January low). The rally was extended toward resistance defined by the December low, 38.2% retracement of the decline from the January high to the March Q I low and the wide “expiration” gap left following February expiration. For three days June traded around that resistance, each day finding support at the upper boundary of the trading range that June defined between mid – March and the beginning of May. On Thursday the prompt reversed higher from that support and traded to the highest price since late January (with strong volume (the highest daily turnover since 02/21).

June settled back from a higher high on Friday, $2.344, to end the week at $2.252 (the highest weekly close since 01/26), still well short of closing the aforementioned “expiration” gap (a fraction of which remains open between $2.344 and $2.411) and 50% retracement of the Q I decline ($2.437). Given increasing volume and what appears to be relatively modest short covering there is a significant likelihood that June won’t turn back down until the resistance above is seriously challenged.

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Biting Into the Gap Pauses — For Now

Daily Continuous

Go into some of the technical considerations from last week’s trade action in the Weekly section. Suffice to say, as expressed last week in the Daily’s the gap from January got gradually chewed up during the week. It still exists and would expect this to be closed during the month. Suggest working within the small trading range for June gas for now ($2.12-$2.34).

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.168-$2.411 (gap), $2.26

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Additional Bites Into Gap

Daily Continuous

The rally continued after the storage release with prices testing near term support only to rally and bite into the gap from January. Playing with length seems to be profitable – but care and respect should be given to the gap closing– should it occur. The bias continues to confirm the change but time will tell and the weekly close should provide my more information.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.168-$2.411 (gap), $2.26

Important Storage Release

Daily Continuous

This week’s release of data is likely one of the last reports that will not have the effects of heat in TX, OK and the southern regions as temps head higher into the late spring and summer months. The timing, from a technical perspective, is very good as the market seems to be consolidating the gains from the end of April and should test the area from $2.12-$2.00, confirming the base zone.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.168-$2.411 (gap), $2.26

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May Be Building a Near Term Base

Daily Continuous

Tight range yesterday– setting up for potentially more consolidation trade which will gather the break out potential. A consolidation process that breaks down will need to deal with the support area between $2.00-$1.90 that has already had several tests and failures.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.00, $1.967- $1.94
Major Resistance: $2.148, $2.168-$2.411 (gap)

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