Just a quick update on a house keeping issue- this will be the last Daily until after the Holiday and to all of you — I wish a very Happy Thanksgiving to you and your families. Prices decided to immediately to return to last week’s high which were rejected per the Weekly section discussion over the last couple of weeks. Will remind you of the trend of ’24 expiration’s and the weakness they have exemplified.
Major Support:,$2.727-$2.784, $2.648, $2.39, $2.35, $2.112, Minor Support : $3.16, $3.00, $2.914, $1.856,$1.89-$1.856 Major Resistance: $3.307 $3.392, $3.487
On a weekly closing basis December gained $.306, the largest gain for a prompt contract since the week before the October high (which included the premium awarded to November over expired October). The only greater weekly gain during calendar ’24 that did not include expiration premium was the week of the January high ($.42)…a high that was finally exceeded on Thursday. Interestingly the high daily close prior to this week was $3.313 on 01/12, the high daily close for ’24 is now $3.339 (11/21).
Despite its weekly gain, soon to expire December ended the week at $3.129 and was well below the midpoint of the week’s range, $3.317. Two weeks ago, I discussed the implications of the substantial increase in open interest from October 9th (1,488,043) through the all – time high on November 8th (1,801,183). In every historical example after such a rise in open interest during an extended period of definable range bound trade is the same…price rises. From the close on 11/08 ($2.669) through the close on 11/21 ($3.339) the number of contracts outstanding fell for nine straight days from 1,801,183 to 1,643,514. That makes 157,669 contracts that were bought to cover contracts previously sold short and a major contributor to the extension of the Q4 rally to 98+% since the August low at $1.846.
Since the aftermath of the failure of prompt gas at January’s lower weekly closing high ($3.331 v $3.473 on 11/03/23) there is the tendency of the gas market to trade lower highs $2.937 in June and $2.921 at the end of September. This week’s close was the first higher high ($3.129), which increases the importance of higher lows traded during March, July – August and October – November discussed in previous Weekly reports.
Another topic of repeated discussion has been that natural gas has constructed and been confined in what has been called a “macro” wide, extended range since mid – January 2023. When December traded through the October high ($3.019 on 11/19 which had been the upper boundary of a shorter – term range (since early September, the prompt wasted little time challenging and closing above the June high, which had been the upper boundary of an intermediate term trading range constructed since the Q2 high. The following day December challenged the January high and set the new high close for calendar 24, and the following day began a test of the upper boundary of the “macro” range (a high that has confined successive prompts for nearly two years). More than one million contracts traded on Thursday as December progressed toward that test (there have only been five other trading days in the history of natural gas trading that as many contracts changed hands in one day). December failed that test in classic fashion, but volume declined as the prompt fell (an estimated 740,000 contracts v more than a million).
Given that decline (lower price, lower volume) and the week’s close above the upper boundary of the most recent defined range, above the trend line declining from January, June and October highs and the December and January contracts closing above their respective 50 – SMAs, during Friday’s volatile session, the presumption that prompt gas will remain confined in that range for the immediate future.
Major Support:,$2.727-$2.784, $2.648, $2.39, $2.35, $2.112, Minor Support : $3.16, $3.00, $2.914, $1.856,$1.89-$1.856 Major Resistance: $3.307 $3.392, $3.487
When I wrote the Weekly analysis over the weekend, my full expectation was for prices to test support at the break out zone around $3.00. Prices opened Sunday night up $.25 and seemingly wanting to challenge last weeks highs. All of this action is with the contract expiring in three days and we have documented the weakness of expiration’s this year. Will be interesting and likely telling for the next few months.
Major Support:,$2.727-$2.784, $2.648, $2.39, $2.35, $2.112, Minor Support : $3.16, $3.00, $2.914, $1.856,$1.89-$1.856 Major Resistance: $3.307 $3.392, $3.487
The break out continued as prices rallied before the storage report release. The trade (post storage) was quiet and declined late in the trade day. That action was likely due to late coming bulls taking profit on earlier positions. I was more interested in the buying (granted after market) in the light late day that sent prices back up to the $3.40’s. As suspected the gains made on Wednesday was generated from short covering (open interest declined on Wed) and I would expect slightly more bears were forced to cover, after a somewhat bullish report, produced little action. As long as this week’s support levels are tested and hold– then there is likely a bias conversion going on.
Major Support:,$2.727-$2.784, $2.648, $2.39, $2.35, $2.112, Minor Support : $3.16, $3.00, $2.914, $1.856,$1.89-$1.856 Major Resistance: $3.307 $3.392, $3.487
Did not write on the Tuesday break above $3.00 because prices did not close the day above that break out level and I assumed that a break down into the zone would follow. Much to the contrary, prices rallied yesterday, not only closing above the key zone but with higher volume and waiting on open interest (lags by a day). This may be the initial start to the annual Q4 rally (higher high already in place) but we all know that today is the storage release and it may have a mitigating impact. Will look into the developing “head and shoulders” technical patter and its impact in the Weekly report on Sunday night– in the mean time you can clearly see the inverted pattern in the Daily Chart above.
Major Support:,$2.727-$2.784, $2.648, $2.39, $2.35, $2.112, $2.026-2.00, $1.991, $1.93 ,$1.642, $1.605 Minor Support : $3.00, $1.856,$1.89-$1.856 Major Resistance: $3.00, $3.16, $3.307
This will be the fourth time that prices have rallied to $3.00, the three previous occurrences have been met with serious selling and an immediate retracement to support zones. Does this attempt have any variation — in outcomes? We shall see.
Major Support:,$2.727-$2.784, $2.648, $2.39, $2.35, $2.112, $2.026-2.00, $1.991, $1.93 ,$1.642, $1.605 Minor Support : $1.856,$1.89-$1.856 Major Resistance: $2.914, $3.00, $3.16
Discuss the trade for likely the remainder of this month in the Weekly section and the Daily has not insights beyond that discussion. Keep selling premium to make some small gains until this stagnant price action re-defines the intention for direction.
Major Support:,$2.727-$2.784, $2.648, $2.39, $2.35, $2.112, $2.026-2.00, $1.991, $1.93 ,$1.642, $1.605 Minor Support : $1.856,$1.89-$1.856 Major Resistance: $2.914, $3.00, $3.16
December began the week with a gap higher ($2.748 – $2.769) and extending its rally to test conventional, moving average and mathematical resistance (all around $3.00).
With volume increasing (average daily volume was 180,000 contracts higher) and open interest declining (total open interest fell 57,000+ contracts from last weeks all – time high) suggested the potential for a spirited round of short covering. Unfortunately for the bulls, December failed at that resistance and declined to close Monday’s gap. Trade up to and failure at a nearly identical price in consecutive months suggests a textbook “double top”, not unlike the twin lows of then prompt November at $2.210 on 10/21 and $2.200 on 10/29, and previously before that prompt October at $2.214 on 09/11, $2.229 on 09/12 and $2.223 on 09/19, clearly defining the low end of trade range.
Now that is a smack down for the recent gains in trading. Up to resistance and then the volume came in an defined near term direction. Back into the range trade and look to last months price behavior for direction.
Major Support:,$2.727-$2.784, $2.648, $2.39, $2.35, $2.112, $2.026-2.00, $1.991, $1.93 ,$1.642, $1.605 Minor Support : $1.856,$1.89-$1.856 Major Resistance: $2.914, $3.00, $3.16
Prices closed just below the resistance area at $3.00- the volatility surrounding the storage release will likely confirm of deny a potential break out.
Major Support:,$2.727-$2.784, $2.648, $2.39, $2.35, $2.112, $2.026-2.00, $1.991, $1.93 ,$1.642, $1.605 Minor Support : $1.856,$1.89-$1.856 Major Resistance: $2.914, $3.00, $3.16
