Support Zone Needs Testing

Daily Continuous

Last week the price declines fell well short of expectations for a test of the break out and spent the week quietly testing old highs for November– this week should provide a different view as I discussed in the weekly section. A small range may develop similar to last month between the break out and last week’s highs.

Major Support: $2.608, $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $3.04-$3.028, $2.99, $2.84, $2.38-$2.26, $2.17
Major Resistance $3.42-$3.48, $3.536, 3.59

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Break Out Confirmed — So Far

Weekly Continuous

Technical analysis holds that once price has broken through the upper boundary of a well – defined range of significant length and done so with internals confirmation of the break, the technical expectation is that the prompt will return to test the breakout level. If the breakout is valid volume during the retracement will diminish and open interest will fall–not necessarily back to the prior low (the total number of contracts outstanding on 09/27 with price at $2.764 was the lowest since 01/30). Support bracketing the old range boundary will limit further decline and prompt gas will trade a higher low and begin to recover for a retest of immediately preceding high. Assuming that price action confirms the breakout level the last low and the higher low will provide anchor points for a new short – intermediate term uptrend. In the current case the upper boundary of the trading range was defined by the March high and then the August and September highs, all between$2.997 and $3.027.

Discussed a comparison to a similar range constructed between Q4 ’20 and Q2 ’21 . Once that construction was resolved to the upside prompt gas did not exactly conform to the expectation of testing the breakout. Rather, trade went very quiet for over two weeks then prompt gas tested support and provide an anchor point for a rising trend line that held over the next four months.

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Storage Can’t Induce Volatility

Daily Continuous

A bullish injection report sent prices to the high of the day only to spend the rest of the trade day declining back to where they started. Perhaps it consolidates for a while but the same result as the range trade between $2.70-$3.00 last month will likely end in a similar result–question is outcome a higher break out or a retest of the $3.00 break out area.

Major Support: $2.608, $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $3.04-$3.028, $2.84, $2.38-$2.26, $2.17
Major Resistance $3.42-$3.48, $3.536, 3.59

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Nothing to Add From Yesterday and the Spot Nov Chart

Daily Continuous

Discussed why price run failed where it did yesterday — nothing to add. Perhaps, a storage release will provide momentum to confirming the bias started last week or provide the selling to test the break out zone.

Major Support: $2.608, $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $3.04-$3.028, $2.84, $2.38-$2.26, $2.17
Major Resistance $3.42-$3.48, $3.536, 3.59

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Prices Seem “Comfortable” With Levels

Daily Continuous

Prices remained calm through the digestion process and nothing seems to stick out from a technical perspective on the Continuous chart above. That said the Spot Nov charts sheds some additional light on why the pause at $3.47-$3.48 area. Look at the spot November chart below below, the area was the high from trade in August on that brief test of resistance while Sept was prompt.

Spot November Contract

From this area there is little resistance in the spot chart until the early March highs.

Major Support: $2.608, $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $3.04-$3.028, $2.84, $2.38-$2.26, $2.17
Major Resistance $3.42-$3.48, $3.536, 3.59

Digesting The Two Day Gains

Daily Continuous

The rally slowed down yesterday as the market digested the gains of late last week. As discussed in the Weekly section, a slow down an a brief test of support (breakout area) is likely warranted now.

Major Support: $2.608, $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $3.04-$3.028, $2.84, $2.38-$2.26, $2.17
Major Resistance $3.42, $3.536, 3.59

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Been Looking For It

It has taken three test of resistance provided by the summer highs at or just above $3.02, but prices finally the result that the market was hinting at through most of the summer. I doubt the market is going to get on a rocket up to $5.00 but this week should provide insight as to how the rally will behave. Due to over-bought conditions currently (see Weekly) would favor a retracement to the breakout level or in the vicinity.

Major Support:$2.83 $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $3.02-$3.04,

Major Resistance $3.24, $3.485, $3.536, 3.59

Headed For The Q4 Rally

This past week, November started out lower, but rather than retreating enough to at least close the remainder of the “expiration gap” left last Thursday prices reversed from a low of $2.820 and posted a strong gain that was reminiscent of the rally to the August high (from $2.457 then prompt September rallied to $3.018 in five trading days) only to fail. This time the resistance that began to be defined by the March high ($3.027) and was further defined by highs during August and September ($3.018 and $2.997) failed to stem the surge of enthusiasm to buy November gas. By the time trading ended for the first week of October prompt gas added $.409 to last week’s close, putting some distance above last week’s first close over the 40 – week SMA since the peak of the December rally (Chart above). Friday’s extension of the rally also left November above its 40 – week and the continuation 50 – day SMA above the 200 – day for the first time since last November. Cannot define this as anything but positive technical events.

Another of the things that changed this week was that increases in volume and open interest accompanied the rally.You may recall that the lack of coordination between price and increases in the number of contracts outstanding and the number changing hands has been repeatedly discussed in the past (as recently as last week). Agreement of price change and market internals is critical for a sustainable trend. A week ago, their divergence was cited as the reason that the consensus of technical indicators failed to reach positive for the first time in many months. That flaw was cured this week. Higher prices (breakout over $3.02) with higher volume and expanding open interest matches the definition of a technical breakout.

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Break Out Confirmation

Daily Continuous

My apologies for missing publishing yesterday — did not set up the server properly– but you missed nothing as my diatribe just spoke about the failure of the move on Wednesday by closing under the key resistance area (after stopping me out on the run). Said the same thing going into the storage report that the selling around $3.00 had a close and low risk opportunity and yesterday proved that it was low risk. The one element that the market provided was the potential confirmation of a bias change with a high volume (daily) directional bias change. It is now imperative for the market to finally confirm this be holding most of the gains through the weekly close.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.84, $2.38-$2.26, $2.17
Major Resistance $3.24, $3.536, 3.59

A Rebound — Looking to Test Key Resistance

Daily Continuous

Not since February has the market broke the resistance provided by the highs at $3.027. Once, in early August, prices tested the area but failed. Now, on the expectations of winter coming, it seems prices are wanting to test this zone again. Time will tell but the good element of this trade is low risk — selling the zone with tight stops just beyond.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance $2.99-$3.00, $3.536, 3.59

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