Author: Willis Bennett

A Weekly Reversal of a Reversal

Weekly Continuation

Spoke a couple of weeks ago about Natural Gas’ tendency to define a bias shift as the price changes direction at a support or resistance area and reverse direction on a high volume week. Now we get a reversal higher last week, from and area that had supported the market previously (just below $2.50) and then found support. The lows of last week were just above the 40week SMA, before finding the bid and running upward to end the week over the downward sloping trend line (from the Nov ’23 high and Jan ’24 highs) that had held the market for the first 6 months of the year.

Volume during the last week was high, averaging 574,278 contracts per day. This was significantly higher than the previous week, but well short of the previous reversal week which averaged over 663,000 contracts per day. Similar to the previous reversal week- open interest declined slightly last week. The reversal last week left prices in the extreme over-bought zone for the Weekly RSI but not the Daily RSI, signalling a slight divergence.

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Storage Release Creates Decline — Only to Reverse

Daily Continuous

Early morning strength gave way to selling on the storage data release, then the market spent the late morning rally back to develop a gain. Play the historical tendencies here.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.448, $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.844, $2.94

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Gains Return

Daily Continuous

Spoke about the history of trade during June after the Memorial Day weakness. Below you see the trades from the lows (date and value) and the rally date setting the high (date and value).

The average percentage gains over the last 10 years is $.481 or 17.06%. This chart shows why the case has been made that prices rally in June setting the high for the month sometime towards the middle of the calendar month. The daily trade behavior seems to be similar to 2023 and would use this as the base case for the coming month.

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July May Be Setting Up a Range

Daily Continuous

The June prompt started strong then developed a range at the end of the month. The July contract may be developing a range at the front of the month followed by volatility (either up or down) later in the month. Ran into a little data error in developing the history of rallies in June and will endeavor to provide it tomorrow.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.67, $2.844

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Seasonal Trend Rhymes

Daily Continuous

Discussed yesterday the historical seasonal norms after the market trades to its Memorial Day weakness– which were evident with the brief rally yesterday. Going to put together a table of the June calendar rallies for tomorrow’s Daily. I did not site the weekly internal trends from last week in the Weekly report and I apologize. Volume fell last week 33% in average daily volume versus the previous week (last week average daily volume over 444,188 contracts versus the average daily the week before 663,043 contracts). Remember the previous week was the weekly reversal discuss then. Open interest declined last week by 30,418 positions (recognizing there was a contract expiration). As discussed previously– follow the volume trends in the near future.

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Historical Expectations Carry Trade

Weekly Continuous

Pre/post Memorial Day price weakness nearly always leads to an early June low followed by one of the most historically consistent rallies during the calendar year. Last week’s declines (expanding the Holiday weakness) was on schedule. Now the question is does the historically reliable seasonal tendency during the early summer of that weakness into June expiration lead to a recovery rally by the July contract in place. Prompt July has traded through the calendar May high in each of the last three years.

Given the high volume weekly reversal just traded week before last expect, June weakened further into expiration…the last four expiring contracts have done so, confirming the recent trend. Given the premium currently awarded to the July contract last week suggests further extension of the Q2 rally. After a “correction”/end of seasonal weakness, expect an historically consistent seasonal rally. The 10 – years average of those rallies is about 17%

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Does History Rhyme

Daily Continuous

Prompt gas followed history, drifting south after the holiday and closed the week lower after the expiring June contract extended the weakness associated with expiration’s of late. Now, does the rhyme continue with a rally in the July contract. Strength this week will lead to that potential– early trade Sunday night is showing some support off of tests of support.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.67, $2.844

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Expiration Tests Break Out Level

Daily Continuous

The expiration took the prompt June down to the key breakout level from earlier in the month around $2.45. July was afforded a premium of a little over $.20 during the process — which will likely lead to weakness as July takes over as prompt.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.67, $2.844

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Expiration May Have Strong Range

Daily Continuous

Early weakness tests near term support only to spend most of the day rebounding. Discussed over the last few months — expiration is not likely to follow any technical interpretations– rather follow who is left and are they long or short. That can lead to wild price range trade– I prefer hanging to the side.

Major Support:, $1.595, $1.52-$1.511, $1.481, $1.312
Minor Support : $2.168, $2.12, $2.00, $1.967- $1.94
Major Resistance: $2.67, $2.844

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Test of Trend Line — Reversal

Weekly Continuous

Prices rallied last week up to the declining trend line off of the late October high (Nov expiration) and the early Jan ’24 high, before running out of buyers. The Memorial Day weakness that has been recently discussed showed up after a strong close the previous week June opened a little higher and stretched the rally to $2.756. Following a little weakness the prompt traded a high volume reversal to the upside on Wednesday with the most contracts traded in a day since 02/21, and closed at $2.798, the highest daily close since 01/17. June’s close was its second highest this year (v $2.808 on 01/09). The pre – holiday price pressure showed up the next day. June traded into a band of resistance between a couple of mid – late January daily reversal highs (and the aforementioned trend line), where the soon to expire prompt printed what is the odds on favorite for the May high at $2.924 and reversed lower with even more volume. Follow through weakness on Friday left June $.404 off its high just a day earlier…and a high volume reversal on the weekly chart.

High volume weekly reversals have long been the gas market’s favorite method of communicating that it has traded to and failed at a significant, unsustainable (at least temporarily) high. Reversal or not, exceptionally high volume weeks are almost always noteworthy events in the natural gas market. For example, the last three times that more than three million contracts were traded were:

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