Author: Willis Bennett

After Gap Down, Prices Recover During Week

Weekly Continuation

January opened with a gap sharply lower from the previous week’s close at $6.281 to $5.900, through support defined by a series of lows traded by January gas between 11/09 and 11/16 ($6.131 – $6.260) and January’s November low ($6.011). The downside momentum generated by the exceptional gap triggered a substantial volume increase and a near immediate test of the continuation November low ($5.614 corresponding to January’s October low, $5.645). On a daily closing basis, prompt gas held the November low on Monday ($5.624 vs $5.614) but trade suggested that those lows were vulnerable to test the June/July lows $5.325 – $5.357. Last week’s low was $5.337.

Prompt January held the support and reversed higher but the odds of closing the weekly continuation gap left on Monday, which remained open between $6.052 and$6.221 were so remote the potential was not even mentioned in the Daily. Sure enough, it was and then some. In a year of improbable occurrences (the first ever annual high during calendar August, so far, for example) January rallying $1.054 after a high – volume gap down followed by the test of lows traded during the summer was one of the more near – term remote probabilities.

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Gap Down — Now Gap Up

Last week prices gapped lower on Sunday night only to extend declines later on Monday and Tuesday. This week the market has decided to gap higher on Sunday night. Last week the market spent the week retracing the declines– not sure it will happen this week (retracing and closing the gap created on Sunday) but with natural gas nothing is impossible. Welcome to the world of trading a commodity based on weather forecasts. Due to that relationship — it would be wise to expect severe volatility in the coming weeks. Evaluate the range that trades today for location to placing positions and expect the $7.00 area to bring some sellers– whether enough to blunt the run will have to be determined.

Major Support: $5.61-$5.44, $4.716, $4.705-$4.68
Minor Support: $6.18, $5.47, $5.337
Major Resistance:$6.45-$6.48, $6.687, $7.19-$7.221, $7.498, $7.532, $7.71-7.75, 8.021,

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Tried To Close Gap

Daily Continuous

Did not see that rally coming off of a bearish storage report–once again when folks expect a bearish report and set themselves up for a negative report and they get it — there is no follow through. It happened a couple of times last month when expectations were met(bearish report) but the market had already sold the news– Prices went up after the release. Can’t say that was the result yesterday– but the move up took out some stops and left me curious of what this market is saying. The gap did not close but got with in a few pennies before retreating– the gap would be the place to initiate positions but prudence has this trader waiting until clearer intentions become prevalent.

Major Support: $5.61-$5.44, $4.716, $4.705-$4.68
Minor Support: $5.47, $5.337
Major Resistance:$6.221, $6.45-$6.48, $6.687, $7.19-$7.221, $7.498, $7.532, $7.71-7.75, 8.021,

Solid Bounce Off Support

Daily Continuous

Prices have jumped in the late trade and are starting to challenge the gap from Monday and last week. Not sure what that is all about as the trade is on light volume and in front of the storage report (all my fundamental friends have told is bearish). As spoken previously, sell the rallies but keep stops very tight as we are still in winter and no one knows what the forecasts will bring.

Major Support: $5.61-$5.44, $4.716, $4.705-$4.68
Minor Support: $5.47, $5.337
Major Resistance: $6.45-$6.48, $6.687, $7.19-$7.221, $7.498, $7.532, $7.71-7.75, 8.021,

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Prices May Be Developing the Low End of Range

Daily Continuous

After dropping over $2.00 in six trade days, price declines slowed yesterday. This may lead to a brief (but potentially violent) rally. Would wait for that rally to initiate new short positions– but remember prices are subject to weather forecast changes– so keep some stops tight to the new shorts.

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Wow – Declines Explode and Create Gap

Daily Continuous

Not much to say but that is why you use stop loss orders last week. We came in today and prices were below $6 and headed lower. Trading down into the lows from late October, the market will develop the low end of potential new range. We now know that the high end of any range is the huge gap from the weekend which will get challenged, though likely later in the winter or next year.

Major Support: $5.72, $5.61-$5.44, $4.716, $4.705-$4.68
Minor Support: $5.47
Major Resistance: $6.45-$6.48, $6.687, $7.19-$7.221, $7.498, $7.532, $7.71-7.75, 8.021,

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Bias Switch

Weekly Continuous

The break down of the trend line (mentioned on Friday) was a clear signal that prices were headed lower. That is why some of these technical levels are so important– they signal break down’s or break out’s. From there the question remained would the break out area around $6.45 hold which it did momentarily before capitulating, opening the door for prices to collapse another $.20. It is clear that the historical trend of weaker prices into early December remains well in place. The consensus of technical indicators had made steady, incremental progress since late October, gave up most of that improvement and retreated to neutral with a price negative bias.

Market internals were mixed during the past week but not nearly as weak as one might be expect given January’s reversal lower, average daily volume was much less than during Thanksgiving week by an estimated 90,000 contacts. Volume is supposed to expand if a substantial price move is sustainable.

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Don’t Look Now — But Back in the Old Range

Daily Continuous

Prices have now returned within the range from last month, as prices broke below $6.45-$6.40 on Friday. This now places prices in the range that was discussed here last month which went down to $5.70 and slight extensions lower. Would patiently wait for the declines define the lower end of the range before starting the range trade strategy. The market now has redefined its bias to sell the rally after the melt down.

Major Support: $5.72, $5.61-$5.44, $4.716, $4.705-$4.68
Minor Support: $5.47
Major Resistance: $6.45-$6.48, $6.687, $7.19-$7.221, $7.498, $7.532, $7.71-7.75, 8.021,

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Declines Continue Below Trend Line

Daily Continuous

Price action sent prices below the trend line but the market close above it at the end. That trend line may not hold the declines associated with annual post Thanksgiving weakness. It does not look like a major melt down with this move but with Natural Gas you never know. Would expect some support during the coming week, but keep the stops tight if you are adding length. Bears play your game– but suggest some profit taking.

Major Support: $6.716, $6.547-$6.50, $6.456, $5.72, $5.61-$5.44, $4.716, $4.705-$4.68
Minor Support: $5.47
Major Resistance: $7.19-$7.221, $7.498, $7.532, $7.71-7.75, 8.021,

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Solid Test of Support Trend Line

Daily Continuous

Prices advanced the declines – testing the support trend line from the Dec lows and the July lows before finding a bid. Now the market needs to confirm the lows and the declines after the storage report that is released tomorrow. It may confirm the from selling rallies to buying the dips (this started with the breakout above $6.45). Keep stops tight if entering length or selling into the new range.

Major Support:$7.00- $6.93, $6.45, $5.72, $5.61-$5.44, $4.716, $4.705-$4.68
Minor Support: $5.47
Major Resistance: $7.532, $7.71-7.75, 8.021,

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