Author: Willis Bennett

Not Well Bid

Daily Continuation

No matter how you cut that trade day — it was not well bid. That being said the expiration process was very strong and set a higher calendar high. While August was enjoying all of the glamour, the fall and winter contracts made less enthusiastic moves. Volume is starting to gather some support and open interest is still lagging but perhaps will show signs of life, but are not showing the strength needed to support an additional longer term run.

Major Support:$8.02, $7.55, $7.14, $6.88, $6.754,$6.38, $6.02, $5.623,
Minor Support: $7.41, $6.42, $5.548, $5.40-$5.45
Major Resistance: $8.95, $8.996-$9.057

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Now That is “Well Bid”

Daily Continuation

Before I could finish my first cup of coffee prices rocketed up to $9.75 — yea baby that is defining “well bid”. Have no clue what that was about but it was on less than 1,800 contracts in 40 minutes. Rock and roll on — here we sit with the option traders basically gutted and little new fundamental information at hand. We’re running out of gas for August but not in September— need help with that variance.

Major Support:$8.02, $7.55, $7.14, $6.88, $6.754,$6.38, $6.02, $5.623,
Minor Support: $7.41, $6.42, $5.548, $5.40-$5.45
Major Resistance: $8.95, $8.996-$9.057

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Guess the Expiration Verdict Is In

Daily Continuous

Given the choices I laid our yesterday– guess the wallow around is finished and there doesn’t seem to be any inspiration for liquidation that could send prices lower. Option traders should seriously look at the $9.00 area after the gains yesterday. Prompt now trades at a $.05 premium to December and a $.17 premium to September (don’t ask). I will not be doing anything during the next two days — rather waiting until the kids try to figure out who just bought the last ticket in and starts the panic. Daily volume continues to wither and open interest continues to languish (early estimates).

Major Support:$8.02, $7.55, $7.14, $6.88, $6.754,$6.38, $6.02, $5.623,
Minor Support: $7.41, $6.42, $5.548, $5.40-$5.45
Major Resistance: $8.95, $8.996-$9.057

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Expiration — A Mystery

Daily Continuous

Not sure what to make of these coming three days of the expiration process. Last month, the sky was fall (as well as prompt) going into the weekend and it looked like the 16 month trend was toast — only to rally 12% in the last two days. This month, prices are coming off of two higher weekly closes and seem to be headed to the moon (discussed in the Weekly section). Does the strength and 16 months trend of prices being well-bid into the expiration– do traders liquidate the moves from last week and take profits– or do prices wallow in a tight zone (the most unlikely considering current volatility). Today is like the key day for August gas– last week folks really like Augy but wanted little to do with the fall or winter prices as August to to a premium to December. That relationship continues to hold on Sunday night as August and Dec are at parity and at a $.13 premium to Sept. August could become an independent beast that no has a clue where it trades — but the market itself may not choose to participate.

Major Support:$8.02, $7.55, $7.14, $6.88, $6.754,$6.38, $6.02, $5.623,
Minor Support: $7.41, $6.42, $5.548, $5.40-$5.45
Major Resistance: $8.417, $8.95, $8.996-$9.057

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Second Higher Weekly Close

Weekly Continuation

After trading to a high of $8.417 last week, prices closed the week at $8.299 for a gain of $1.283 (close to close). Clearly extraordinary gains over the last two weeks and left both the prompt August and September well above the commonly watched moving averages.

Despite this week’s strength, the consensus of technical indicators, failed to confirm the recovery with across the board in a positive (supportive) agreement. Due to the continued weakness in market internals- Open interest continued to decline as the market rallied. This week the total fell another +/- 20,000 contracts to the lowest level of participation since early 2016 – Average daily volume declined an estimated 20,000 contracts during the past week. Volume is currently less than the 50 – day average of contracts that has traded each day of the recovery from the 07/05 low with the exception of one. On 07/12 an “outside” day reversal to the downside was traded with the highest volume of any day during July. With the trading days remaining in calendar July, volume to date is estimated at 4,502,359 contracts while calendar June’s final total of 8,407,189– its is looking like July calendar trading has suffered very large volume losses compared to its predecessor.

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Bullish News — Prices Retrace at the End

Daily Continuous

A crack developed in this recent bull run, as a bullish (so I am told) storage report released and ran prices up only to find sellers during the remainder of the trade day. Have discussed the perils of the light trade and lack of open interest over the last month and yesterday should send a warning flag to the bulls. When prices rally and don’t hold the gains on bullish news — it may be time to re asses.

Major Support:$7.55, $7.14, $6.88, $6.754,$6.38, $6.02, $5.623,
Minor Support: $7.41, $6.42, $5.548, $5.40-$5.45
Major Resistance: $8.02, $8.176

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No Tranquility Here

Daily Continuous

So how does that work– prices are showing slight strength all morning setting up for an additional day of “calm trade” when the market jumps over $.35 in just 5 minutes. Must of been an important news issue but it shows again the inability of this market to “build” upon it’s gains. If it was a weather report — great — wait until the Cdd’s get adjusted down and prices plummet $.35. Not a good environment for a trader to hang out in unless you a long term — say the winter which has Dec trading just a $.04 premium to August. Lack of interest, higher volume yesterday, and high volatility rules nat gas currently.

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Calming Trade

Daily Continuation

Prices did not retrace all the gains from Monday but the range trade held and the daily range remained strong. Would continue to expect a summer range to hold prices near term. What will be of interest is the setup for the expiration process — declining only to rally at the end.

Major Support:$7.14, $6.88, $6.754,$6.38, $6.02, $5.623,
Minor Support: $6.42, $5.548, $5.40-$5.45
Major Resistance: $7.41, $7.485, $7.55

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Another Big Rally

Daily Continuous

As discussed in the Weekly section yesterday, these big rallies and declines are not in the best interest of trying to develop a sustainable trend. They are great for a short term gain (or loss) but does not promote open interest gains seeking longer term gains. Yesterday the gains went up to the 50 day SMA (yipppeeee) only to invoke some selling –OK. Are we up another $.40 today with low volume and no gains in positioning — or perhaps down $.40– reversing yesterdays gains. NO CLUE.

Major Support:$7.14, $6.88, $6.754,$6.38, $6.02, $5.623,
Minor Support: $6.42, $5.548, $5.40-$5.45
Major Resistance: $7.41, $7.485, $7.55

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Prices Extend Gains

Weekly Continuation

Prices continued the gains that commenced after July 4th, closing at a four week high. The run took prices over the 20 Week SMA (closing basis) after closing below it for the last three weeks. Over the last fifteen weeks (since early April), prompt gas has traded an average range of $1.334, during the week and only four of those weeks traded less than a dollar from low to high. Coincidentally, the average daily closing price for those seventy trading days is $7.366, the average weekly closing price $7.279. Hedging and speculation require levels of risk management and approaches impossible when the gas market trades nearly 20% of the average value of the contract each week. The inability to manage risk exposure causes participants to withdraw from the market, which further reduces open interest and liquidity. Perhaps volatility will diminish over the next couple of months as prompt gas constructs a series of higher lows and lower highs, developing the summer range discussed previously.

Weekly Continuous with Range Highlighted

The market has been here before recently. Look at the chart above, and notice the five weeks in December ’21 as the declines were dramatic up to a point and then a “range” developed, creating the consolidation for the break out above in January ’22. This period also had a decline in volume (lower half of the chart) until prices broke out and the volume exploded. A similar picture can be drawn from the current market (though only four weeks) as price consolidated (range trade) only to develop the momentum to move higher. Similar to last December, prices may not “take off” from here but any type of retracement to test initial support at $6.80ish and beyond around $6.42-$6.50 (spot) should be respected.

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