Author: Willis Bennett

Storage Report Provides Volatility

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I suggested earlier in the week that the range trade issue might need the storage report to provide bias. What was surprising, was the bearish report providing the reason for a bullish run? Not sure what that is all about but if you are waiting to buy — be cautious as the Dec contract did not rally equal to the Nov run and the difference between Dec and Nov declined to a low of $.25 (the lowest of the year) suggesting that the move in Nov is not an indication of upcoming winter prices. That will get further definition as the Dec takes over as prompt.

Major Support: $2.82-$2.78, $2.74, $2.608, $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.84, $2.38-$2.26, $2.17
Major Resistance $3.185, $3.42-$3.48, $3.536, 3.59

Just Can’t Muster the Commitment

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So close to both ends of the range trade but prices don’t have the commitment to break through either direction. Perhaps — this will lead to anther calm expiration but you never know with options expiring on the storage report this Thursday. That event may lead to some volatility, because this market, currently, is not showing any bias direction.

Major Support: $2.82-$2.78, $2.74, $2.608, $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.84, $2.38-$2.26, $2.17
Major Resistance $3.00, $3.185, $3.42-$3.48, $3.536, 3.59

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Consolidation At Low End of Range

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Prices spent yesterday trading in a less that $.10 range which the market may be signalling a consolidation period while it absorbs the large losses in the past 6 trading days (nearly $.50). As discussed in the Weekly section, prompt month is not my center of focus, but rather the December contract and the hefty premium to Nov contract that it currently enjoys.

Major Support: $2.82-$2.78, $2.74, $2.608, $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.84, $2.38-$2.26, $2.17
Major Resistance $3.00, $3.185, $3.42-$3.48, $3.536, 3.59

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Starting To Evaluate Length

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With prices gaping lower last week, prices were destined to challenge support levels from the summer. Discussed the week’s action and the ramifications, in the Weekly section and now this week we will look at the expiration of the Nov contract. Guesses suggest that a range has developed between the two gaps but the gaps also provides great targets. Generally, there remains a bullish bias to trend as there are a series of higher lows with higher highs– but the December premium gives me pause for serious length.

Major Support: $2.82-$2.78, $2.74, $2.608, $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.84, $2.38-$2.26, $2.17
Major Resistance $3.00, $3.185, $3.42-$3.48, $3.536, 3.59

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Break Out Support Zone Breached

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The break down through the break out zone can not be understated from a technical standpoint. The question becomes does the decline continue to test the gap from the expiration or does support commence before.

Major Support: $2.82-$2.78, $2.74, $2.608, $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.99, $2.84, $2.38-$2.26, $2.17
Major Resistance $3.42-$3.48, $3.536, 3.59

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Shrinking Range Continues

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Not a lot to add to from yesterday, except the declines yesterday occurred on low volume after the price rallied in the early trade. Would play the range into the storage report.

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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Similar Activity

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Similar to the previous months, prices moved in a direction tested the support or resistance then spent some days in a consolidation pattern deciding the next directional bias. We shall see what happens this month as prices seem to be consolidation just above the support 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, $2.99, $2.84, $2.38-$2.26, $2.17
Major Resistance $3.42-$3.48, $3.536, 3.59

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Solid Initial Test

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As expected, prices tested the high end of the break out zone from last week. From that test, the price action set up a small rally to settle over $3.10. The market should continue to test the lows and provide good low risk opportunities to enter the market with low risk stop areas.

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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Support Zone Needs Testing

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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

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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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