Author: Willis Bennett

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

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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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Declines Occur With Lower Volume

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After trading just briefly back above the June high ($2.839, the previous week’s high was $2.863) September gas reversed lower, again failing to close above the zone of resistance between the June and July highs with an increase in open interest. That failure brought a decline further than anticipated but with a substantial decrease in volume. The target suggested last week was $2.60ish but that zone of defined support did not limit September’s fall as the prompt traded to a low of $2.524 before recovering to close at $2.551. Notably, the close was well above the cluster of weekly lows that traded between the end of June and the beginning of August (+/- $2.45 –$2.49) but also below last week’s low. A lower close below the previous week’s low infers additional weakness coming.

Despite modest price erosion of near term gas over the last two weeks, September closed $.026 lower than two weeks ago, but the strips are higher with winter $.136 over the last ten trading days, one – year $.092 higher. Perhaps that’s how the Q3 seasonal pressure plays out this year. The strips are much closer to earlier highs. Prompt gas traded that Q2 high on 06/28, the high daily close of the winter ’23 – ’24 was $3.613, Friday’s close was $3.612. The high daily close of the continuation one – year during the closing days of June was $3.363, Friday’s close $3.307. Maybe my analysis is way off base but seems to me those differences suggest that sponsorship is building for deferred/distant deferred contract months.

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Consolidation With In the Range

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The storage report provided little or bias impact so prices spent most of the day consolidating in a tight range. As suggested a few weeks ago — this may be as exciting a trade as Natty will give us for a while.

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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Declines Extend

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In the Weekly section on Sunday — I expected a decline to be retesting lows around $2.69 — well I missed that decline by more than $.10. Now what – perhaps additional declines to $2.47 may occur but they are likely to be brief. My expectations are that the low end of the new range should be completed (near term)– from which prices will rally back to test resistance.

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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OK – Support Zones Tested

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What can I say — my expectations were a day early and I got my test for support a day later than when I suspected. Regardless, the market is defining the upcoming range that it will likely trade within during the next couple of weeks.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.74, $2.38-$2.26, $2.17
Major Resistance $3.00, $3.536, 3.59

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Working Through the Kinks

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Prices did not find the weakness I was looking for yesterday — though there was a slight decline but not achieving what I was expecting. They did find a solid bid and ran that into the close and in the late market. Maybe establishing the low end of the new range will take some time in order to work through some support zones. Currently, prices seem to want to test the high end of the range per my Weekly section yesterday.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.74, $2.38-$2.26, $2.17
Major Resistance $3.00, $3.536, 3.59

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A New Range Likely to Develop

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With last week’s bias change (see Weekly section for details), it is likely that the market will try and redefine a new near term range for the September contract between $2.67-$3.01. Would trade this range accordingly for the upcoming week or so. Remember that the Labor Day weekend is historically a weak period for prices (either before or just after) so adjust expectations accordingly. Several of you have asked about the upcoming winter prices and hedging ideas – while I don’t publish them in the web site — I may provide some analysis about the winter strip later in the week.

Major Support: $2.47, $2.00, $1.991-$1.96, $1.795-$1.766
Minor Support $2.74, $2.38-$2.26, $2.17
Major Resistance $3.00, $3.536, 3.59

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A Defining Week

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The market has prompt gas construct and remain confined within a tight trading range about a third as wide as the range constructed between the range traded during calendar March for a while. The expectations were that prompt September would remain within that range for the duration of its tenure. Then there were four straight weekly lows between$2.457 and $2.492 (and others in the neighborhood), and the tendency of September gas to trade the low of its tenure in early August, fed the bias is that prompt gas is winding up for a run later into the quarter. Well I did not see was the likelihood of a short covering event the likes of which I can’t recently recall.

Open interest (the total of contracts open in the market) has been falling since a peak of 1,389,864 on June 6th (4 days after the June low at $2.136). As written here many times, when open interest falls while price increases the presumption is that participants buying contracts to offset those previously sold short is a significant contributor to an increasing bid. Since that June low prompt gas had traded as high as $2.839 (the June Q2 high) as the liquidation of open interest remained a more or less orderly process while the weekly closing trading range between +/- $2.47 and $2.80 was constructed. That ended this past week.

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