Author: Willis Bennett

Stalls At High End of Range

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Prices reversed from a new low for September’s tenure and the soon to expire prompt had a gap higher, finding similar selling at similar levels tested earlier in the month. Before September expiration (about exactly midway between the July and August settlement values) the expiring prompt closed the gap and ended with a last two day gain. New prompt October (carrying a $.121/dt premium when September settled at $2.556) the new contract month immediately built on that premium closing on the first day of its tenure at $2.806…right in the middle of the zone of resistance between the June and July highs. October tried twice more to close above that zone (trading to highs of $2.865 and $2.860) but both times ended those trading sessions lower.

The new prompt gas is following the historical technical script fairly well. As discussed prices around Labor Day have a period of weakness on either side of the holiday. The prompt gas tends to rally to a Labor Day high before weakening immediately before or immediately following the holiday period. Most often that weakness leads to a mid – September low. The average of the declines over the last ten years is about 10%.

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Was Off Base

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Well, guess I was a little off base when prices only declined to $2.647 which was well above the close and expiration of the September contract. The Labor Day trend, though, has not completed yet so perhaps the prognostication will prove relevant. Time will tell — storage release — yee haw, the gap between 5 year and this year continues to narrow but the story remains the same — we got plenty of gas in the ground. The bears have to realize that depending on forecasts and actuality, that “surplus” can disappear quickly in November. Trade wise the top of the range now is $3.00 and expect selling there.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance$2.83, $3.00, $3.536, 3.59

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September Goes Quietly

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Staying within the range that September contract had developed, it went out on a quiet note towards the low end of the range it had developed. Now we have a fresh Oct contract with tropical disturbances (bearish) and the Labor Day weekend trends (bearish before/or after the holiday). Then you include my prediction in the Weekly analysis, that the new prompt would likely give up any premium it had to Sept and you have my prediction for the next two days of trade. Won’t hear from me until after the holiday.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance$2.83, $3.00, $3.536, 3.59

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Two Days Left — Range Rockin

Daily Continuation

As discussed in the Weekly area — would expect the premium afforded to the October contract to dissolve after the September contract expires. Perhaps, the premium dissipates during the expiration– we will see. From a trade perspective watch the premium vs the September movement.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance$2.83, $3.00, $3.536, 3.59

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Gas Continues Recent Behavior

Weekly Continuous

It certainly appeared that tendency was at work when September rallied to close higher for five straight days from a low of $2.457 on 08/02 up to test the March high, but there has been a different tendency during ’23, to which there has been little discussion here. The only expiring monthly contract this year that has had a semblance of a rally into expiration (a trend contrary to the trend of 2021 and 2022) was July and it lost about a quarter on its final trading day. After printing the June Q2 high on 06/28 expiring July traded an “outside” day reversal to off the board at $2.603. The others either traded the low of their tenure during the last three days before expiration (January, February, March, April, and August) or fell hard from a lower high (May $2.385 to $2.101, June $2.685 – $2.143). The last week there was too much attention to the 08/09 high volume breakout through the June/July highs. Still, despite a new low daily close ($2.486, the lowest daily continuation close since $2.485 on 06/20), trading through all those weekly lows (five between $2.457 and $2.536) and briefly through the 20 – week SMA (currently $2.471) September managed to recover enough to hold the fledgling up trend defining moving average and the trend line rising from the April – May – June lows on a daily and weekly closing basis.

Over the five Fridays of prompt September’s tenure there have been four lower weekly closes. September’s net loss since Friday 07/28 is $.167/dt September giving up its premium plus $.026 at the low daily close of its tenure. It’s not like they took September and shot it. The more interesting elements are that over those same four of five losing weeks the current one – year strip is only $.008 lower. If September is $.167 lower and the strip is only $.008 lower there must be some under the radar allowing strength to occur somewhere. As it turns out, the average of November ’23 – March ’24 is $.037 higher over the same period. Seems to me that is supporting evidence for the thesis that sponsorship for deferred and distant deferred contract months is slowly gathering. For now, there is no doubt that the trading range that confined successive prompts for all of Q2 (perhaps setting up a similar range for Q3), will continue to be the primary consideration (meaning the appropriate strategy for traders to buy weakness – sell strength). Expectations are for the October to give up whatever premium is awarded when September trades its last, but it seems reasonable to point out that every time that prompt gas has traded into the mid $2.40s since the middle of June (prompt in waiting October into the mid $2.50s) the zone on either side of $2.80 has been tested.

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Startling Response to Bullish Report

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When prices don’t rally on bullish news (storage report) then you have a segment of folks lining up to keep the price low– question is — how long can they keep it suppressed before another short covering rally like two weeks ago. It is a bearish seasonal period though but running out of prompt.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance$2.83, $3.00, $3.536, 3.59

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If Not Now– When?

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Prices continued the declines and are now clearly wanting to test the calendar July and late Jun lows– Then what happens but the test needs to occur.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance$2.83, $3.00, $3.536, 3.59

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The Ranges Keep Getting Quieter

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Prices stayed quiet after the initial declines– patience is the best trading advise I can provide — play the outer ranges and if bored sell premium.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance$2.83, $3.00, $3.536, 3.59

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Where Do We Go — Nowhere

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Discussed the possibility of price action dying during the summer and staying in a range. My worst fears seem to be occurring.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance$2.83, $3.00, $3.536, 3.59

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Price Action Declines to Support

Daily Continuous

The quiet declines continued into the close on Friday with prices firming just below the $2.57 – $2.60 zone. Due to a close of weekly prices below the previous week’s low- the technical expectation is for prices to extend the declines further. History tells us that the Labor Day weekend is historically linked with weaker prices so this will be interesting to watch. From a trade perspective, buy the lows of the range and sell on the rally off of a failed test.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.38-$2.26, $2.17
Major Resistance$2.83, $3.00, $3.536, 3.59

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