Author: Willis Bennett

Gap Downs — Now a Gap Higher

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Been talking about gaps lower after the weekend for the last few weeks. This week it turns out to be a gap higher at the time of this writing (likely due to the storm on the East coast). Would not read a lot into this action going into the expiration process but the high side of trading has some well defined resistance from the remaining gaps. The downside has be defined in the last couple of weeks.

Major Support: $3.024, $2.97-$2.93
Minor Support/Resistance : $3.16-$3.148, $3.136
Major Resistance: $3.787-$3.831, $4.063, $4.086, $4.593, $5.333, $5.496

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Smaller Withdrawal Corrects to Low End of Range

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Mentioned earlier in the week the market seemed to be looking for a fundamental justification for a bias break out of the range. I was wrong as yesterday’s bearish storage number could only take prices back to the low support range- but break down further. Want to analyze the week as a whole for any directional bias but I don’t think there will be any massive adjustment to my thinking as we are headed into expiration next week.

Major Support: $3.024, $2.97-$2.93
Minor Support/Resistance : $3.16-$3.148, $3.136
Major Resistance: $3.787-$3.831, $4.063, $4.086, $4.593, $5.333, $5.496

Lows of Range Confirmed

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The three day weekend low was confirmed yesterday but not broken as prices found support just above the Monday low. Seems like the range will continue to hold short of a fundamental issue (storage report) that could potentially adjust bias near term.

Major Support: $3.024, $2.97-$2.93
Minor Support/Resistance : $3.16-$3.148, $3.136
Major Resistance: $3.787-$3.831, $4.063, $4.086, $4.593, $5.333, $5.496

Seeking Confirmation

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Last week after March rallied from Monday’s high volume low ($3.155) on substantial lower volume. The air left the balloon and prices succumbed to gravity (gravity is the only thing that works every time).

A low volume rally after a high volume decline suggests an absence of enthusiastic buying interest. Typically, the result of the brief run is that price returns from whence it came…and often somewhat lower low. That is exactly what happened during the past week.

March began that process with another gap down…that remains open between $3.316 and $3.387. The prompt traded a lower low on Tuesday and Wednesday. The last two of those lows carrying March into the target zone between $3.025 and $3.100. The important technical news is not that the bounce didn’t last or that March traded a lower low, the more important factors are 1) that the prompt did so with lower volume, 2) that the low before a minor “outside” day reversal higher was above the rising long – term trend defining trend line and, 3) that the low was a higher low (higher than the January low, $3.055 v $3.006). The last technical aspect of trade was corrected with a lower low on light trade Monday.

The consensus of technical indicators continued to deteriorate but resists clear negative agreement, similar from the way the consensus declined positive agreement during the December and January rallies.

The aftereffects of extreme range expansion are still being felt by momentum indicators, but the math is slowly returning to normal. Without regard to the anomalies created a few weeks ago, weekly indicators have a price negative bias with bearish momentum divergences. The daily MACD is similarly oversold to the calculation just preceding the January low. Market internals presented a unified positive bias for the first time in a while. Volume fell along with prompt gas as did open interest which both are technical positives.

Major Support: $3.16-$3.148, $3.136-$3.024, $2.93
Minor Support/Resistance :
Major Resistance: $3.387, $3.787-$3.831, $4.063, $4.086, $4.593, $5.333, $5.496

Another Gap

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Once again the three day weekend left the market with a gap and price could not fill it by the end of trade Monday. Prices did establish a lower low which from a technical standpoint is interesting but the lack of volume makes me suspect. A new week, winter is starting to wrap up what will pull the markets interest.

Major Support: $3.16-$3.148, $3.136-$3.024, $2.93
Minor Support/Resistance :
Major Resistance: $3.38,$3.787-$3.831, $4.063, $4.086, $4.593, $5.333, $5.496

Storage a Dud

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Storage report could not provide needed inertia to challenge either side of the range. Hate to be boring but I am not going to talk about events in gas when they aren’t prevalent. This range type trading may be setting something up for the last part of the month and expiration. Going to be looking at history over the weekend and will publish anything I find on the Weekly section.

Major Support: $3.16-$3.148, $3.136-$3.024, $2.93
Minor Support/Resistance :
Major Resistance: $3.32, $3.787-$3.831, $4.063, $4.086, $4.593, $5.333, $5.496

Starting With a Decline Sunday

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Guess a lot of bears were rooting for the Sea-hawks as prices started with a distinct negative bias last night and were starting to challenge the support zone from the recent range development. This week may be one for extreme patience as the volatility and bias needs to filter out.

Major Support: $3.374, $3.16-$3.148, $3.136-$3.024, $2.93
Minor Support/Resistance :
Major Resistance: $3.787-$3.831, $4.063, $4.086, $4.593, $5.333, $5.496

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New Range To Be Tested

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Two weeks ago, after February spiked to the highest settlement value for a monthly contract since September ’22, March began to make up its historically exceptional discount to an expired prompt ($3.732 v $7.460). Well – bid into the weekly close March traded as high as $4.425 late Friday, narrowing the still substantial “expiration” gap by $.436, but the enthusiasm for perennially amply offered March gas was short – lived. When trading resumed March gapped lower. With the most volume ever traded in a day (1,909,214 contracts…the previous record was 1,602,673 traded on 11/14/18 coincident with the Q4 and annual high of 2018) March continued to fall toward a bottom at $3.155 (27.5% below the new prompts close on the last trading day of January).

As March fell, open interest spiked 55,153 contracts (I don’t think that’s a record, but you can see it from there). If open interest increases as price falls it is an article of technical faith that the bulk of the selling was either short hedging of anticipated production or speculative short selling driving the bid lower (if the selling was from liquidation open interest would have fallen). While there was certainly some of both, I am pretty sure the latter was a significant contributing factor…because the following day when March rallied the total fell 54,189 contracts. A whipsaw for the ages for those folks ( illustrative of the dysfunctional state of the current market). Look for additional dysfunction in the coming month.

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Excitement to Dull

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This is what happens to a market that gets juice up, creates the volatility with short covering then looses all it momentum and plummets back to reality— Boredom sets in — nothing to get nothing to drive — just minor range moves. I think I see my future. One part of my future is there will be no Daily on Friday -enjoy the storage release.

Major Support: $3.374, $3.16-$3.148, $3.136-$3.024, $2.93
Minor Support/Resistance :
Major Resistance: $3.787-$3.831, $4.063, $4.086, $4.593, $5.333, $5.496

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Range Trade Starts to Develop

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Mentioned yesterday that a range would start to develop and was confirmed in the trade. Will likely take some sort of fundamental event to bring any volatility back to the gas market.

Major Support: $3.374, $3.16-$3.148, $3.136-$3.024, $2.93
Minor Support/Resistance :
Major Resistance: $3.787-$3.831, $4.063, $4.086, $4.593, $5.333, $5.496