Author: Willis Bennett

Lots of Bears Gathering at Expiration

Daily Continuous

Heading into expiration all I can say is there is a whole bunch of bears going to the same river to feed at the same time. Whether or not the storage number has anything to add to the upcoming expected feeding frenzy — I offer little insight. What I can offer is caution as it has been my experience when so many are expecting an “outcome” whether bullish or bearish it rarely works out to expectations.

Major Support: $3.269, $3.18-$3.09, $3.00
Minor Support:
Major Resistance$3.536 –$3.63, $3.789, $4.22-$4.39, $4.75-$4.825, $4.948, $5.056

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Daily Trade Educational

Daily Continuous

Prices opened strong on Sunday night and maintained strength for a couple of hours before being subjected to the current bearish sentiment and falling nearly to the close last Friday. Something interesting happened then’ as prices reversed and challenged the highs of the early trade. Not sure what can be made of that but history is telling me that prices are due to rally but how high is unknown.

Major Support: $3.269, $3.18-$3.09, $3.00
Minor Support:
Major Resistance$3.536 –$3.63, $3.789, $4.22-$4.39, $4.75-$4.825, $4.948, $5.056

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How Low Does It Go

Daily Continuation

Analyze some of the historical precedence of the current market in the Weekly section, but the declines may start running into support in the market. In spite of many folks analysis — this market shows little signs of continued weakness with out providing a rally of sorts (perhaps to $3.75) before an additional leg lower. Sunday night trade has provided a strong chance for reaching that level as the opening was up to $3.48.

Major Support: $3.269, $3.18-$3.09, $3.00
Minor Support:
Major Resistance$3.536 –$3.63, $3.789, $4.22-$4.39, $4.75-$4.825, $4.948, $5.056

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Another Lower Weekly Trade

Weekly Continuation

Prompt gas closed lower for the sixth straight week (each week since the peak of the seasonal rally to a mid – December high – a one week uptick following a two week decline from the November high). Over those weeks, on a closing basis, prompt January and then February have fallen from$7.024 to $3.174. That kind of decline is not unprecedented, but it is rare and it has been a long time since last occurring.

There are other mathematical indicators that are used to monitor the overbought/oversold condition of the market, one such tool looks at the percentage the market trades as compared to the 40 week Simple Moving average. At Friday’s close prompt gas was 53.7% below the now declining intermediate – long defining moving average. You may recall at the high weekly close during August prompt gas was 54.5% above the 40 – week. Over the history of natural gas trading there has only been one other comparable rally and decline that carried to similar extremes.

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Further Declines Expand Low End of Range

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Guess everyone is getting geared up for the upcoming bearish storage report as price expanded the range downward towards the end of the day. Still over sold (momentum indicators), continues to challenge 2 standard deviations below the 20 week SMA, and volume maintains average levels– looks like a bear market from the tech standpoint–but I have a lot of experience selling (or buying) at 2 standard deviations beyond the 20 wk — so I will stick with sell the rallies and defer to add to positions.

Major Support: $3.14-$3.00
Minor Support:
Major Resistance$4.22-$4.39, $4.75-$4.825, $4.948, $5.056

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Holiday Prices Bounce Off Support

Weekly Continuation

The current natural gas market is dissimilar to last year (from a technical standpoint) as prices are now developing over-sold conditions from declines that commenced last September.  As the weekly chart (with Bollinger Bands) shows below, the market is now trading at 2 standard deviations below its 20 week moving average (last week’s close) —a level that historically does not maintain the market for very long and usually presages a rally or series of rallies.

Weekly Continuation with 2 Standard Deviation Bollinger Band

It is also concerning, that the declines of late have caught the interests of the speculators.  The latest Commitment of Traders Report has the Managed Money Short positions increasing their short commitments with the expectations of further declines.

Weekly Continuation with Managed Money Short Positions

The increased attention from the speculators to the price action suggests that there will likely be upcoming volatility in the market.  When this group comes into a market aggressively—it sets the market up for violent short covering rallies when the prices find support. Exposure to these rallies should be minimized by a hedging strategy.

Expect rallies off of support and should these rallies break some key resistance areas — forcing the shorts to cover some positions– the rally may become violent.

Major Support: $3.638-$3.536
Minor Support:
Major Resistance$4.22-$4.39, $4.75-$4.825, $4.948, $5.056

Monday Holiday Brings Support

Daily Continuation

Prices finish last week just off the lows which would suggest weakness in the coming week– that did not occur yesterday as prices opened up and held support during the light trade day. Discuss the market in the Weekly sections– so won’t repeat here — give a quick look. Other than those comments, look for the recent range to continue in the coming week.

Major Support: $3.638-$3.536
Minor Support:
Major Resistance$4.22-$4.39, $4.75-$4.825, $4.948, $5.056

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Still In the Range

Daily Continuation

Can’t add a lot of flavor about the consolidation range trade that has been around all week. Market started strong in the face of a bearish (expected) inventory number only to have the gains melt away towards the end. May not be able to generate returns in this type[e of market — so sell some premium.

Major Support: $3.638-$3.536
Minor Support:
Major Resistance$4.22-$4.39, $4.75-$4.825, $4.948, $5.056

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