Author: Willis Bennett

Reversal of the Reversal– Hello Range

Weekly Continuous

With the holiday today I am going to limit the commentary in the Weekly and Daily. The range traded on October 2nd was $3.402 – $3.585. November managed a higher close on Tuesday ($3.519) but volume was about 60,000 contracts less than the 10/02 reversal day. After extending the recovery to $3.550, .03 short of last week’s high, November collapsed (putting another high volume reversal day in place and further defining and strengthening the resistance zone. Total open interest fell on both the 10/02 and 10/08 reversal days, which strongly suggests that short covering and contract liquidation were significant contributing factors. Simply put, there was not nearly enough buying interest for prompt gas above $3.500 to support further extension of the rally or to prevent the significant reversals to the downside.

For the last nine weeks November has been confined in a well – defined range between +/- $3.10 and $3.50. The last weekly close outside that range was the first Friday of August. Last week, since trading the two daily lows that began construction of the lower boundary of the range, the current prompt has been briefly offered below that lower boundary twice…consecutive days on 09/22 & 23, and has now failed twice above the upper boundary. This week’s lowest close with the highest volume of any week during the consolidation is an indication that November will be offered lower again.

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Holiday — Lighter Trade

Daily Continuation

Not a whole lot of detail or technical interpretation beyond what was published in the Weekly section for the lighter trade expected today.

Major Support: $3.167, $3.06, $3.00-$2.97, $2.843, $2.727, $2.648
Minor Support :
Major Resistance:$3.19, $3.39, $3.62, $3.80-$3.85, $4.168, $4.461,

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Seeking Support

Daily Continuous

Not a lot of technical information on the activity yesterday other than the storage data provided the stimulus to seek the low side of the range. Still a range market no significant bias change.

Major Support: $3.25, $3.192, $3.167, $3.06, $3.00-$2.97, $2.843, $2.727, $2.648
Minor Support :
Major Resistance: $3.39, $3.62, $3.80-$3.85, $4.168, $4.461,

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No Change, Just a Test

Daily Continuous

I guess the upcoming storage data is going to be bearish as the market jumped on the price rises from the day before (I thought the data release was going to be affected by the shutdown). Regardless of the outside forces -, the price decline confirmed there is no bias change but rather a test of resistance that failed and retreated to the middle of the recent range.

Major Support: $3.25, $3.192, $3.167, $3.06, $3.00-$2.97, $2.843, $2.727, $2.648
Minor Support :
Major Resistance: $3.39, $3.62, $3.80-$3.85, $4.168, $4.461,

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Bias Change?

Daily Continuous

Unlike last week’s excursion over the 200 day SMA and the 40 week SMA prices held the gains into the close– now it will need to confirm the action. The next couple of days will confirm– the trade remains the range of late but be cautious of shorting the high side.

Major Support: $3.25, $3.192, $3.167, $3.06, $3.00-$2.97, $2.843, $2.727, $2.648
Minor Support :
Major Resistance: $3.39, $3.62, $3.80-$3.85, $4.168, $4.461,

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Prices Firm Within Range

Daily Continuous

The price action started strong and then leveled off — never testing the highs of last week but staying firm. Suggest working the range and if you’re selling premium in the option be cautious of the proximity to prompt as the market has not ruled out a run nor a collapse.

Major Support: $3.25, $3.192, $3.167, $3.06, $3.00-$2.97, $2.843, $2.727, $2.648
Minor Support :
Major Resistance: $3.39, $3.62, $3.80-$3.85, $4.168, $4.461,

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November Develops A Possible Range

Weekly Continuous

Discussed the large premium last week on the expiration of the October contract and rather than immediately build on that exceptional premium, the new prompt began the week by opening lower, $3.149 vs last week’s close at $3.206, still a premium of $.314 to October settlement. After fading to $3.133(narrowing the weekly continuation gap that extends down to $2.968), November rallied to test well – defined resistance at the top of a trading range that has confined it since mid – August. Although volume was nothing to write home about the prompt overcame resistance presented by its 50 – day SMA, then multiple weekly and daily highs, discussed during the week, and the trend line declining from the continuation March and June highs.

Most of us in the natural gas trading universe thought there were buy orders above that declining resistance. Once through it November spiked all the way to the 40 – week SMA. Wednesday’s close was $3.476, the value of the 200 – day SMA $3.483. There was also a gap between $3.475 and $3.494 and November closed that gap and then some…but could not close above the 200 – day. Instead, a high volume reversal day…with the highest volume since May 20th (an upside reversal day from a higher low that carried through until the June Q2 high).

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The Nov Range Should Hold

Unfortunately, I am unable to download the Daily Chart associated with the Daily- Look at the Weekly chart in the Weekly section and you will notice what I am referring too. The market chose to test the support only to reverse upward on what may be indicative of a bias change. Treat the range with respect as the breakout or breakdown will likely not occur immediately.

Major Support: $3.25, $3.192, $3.167, $3.06, $3.00-$2.97, $2.843, $2.727, $2.648
Minor Support :
Major Resistance: $3.39, $3.62, $3.80-$3.85, $4.168, $4.461,

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Larger Move

Daily Continuous

Spoke yesterday about a bullish move taking small steps and sure enough, the market rallied quickly in trade yesterday. Waiting for the volume and open interest publishing but the market challenged the 200 day SMA for the first time in over a year. Today is storage day and should provide solid evidence of any bias correction. Play the new range….

Major Support: $3.192, $3.167, $3.06, $3.00-$2.97, $2.843, $2.727, $2.648
Minor Support :
Major Resistance: $3.25-$3.31,$3.39, $3.62, $4.168, $4.461,

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Without Short Covering – Rallies Are Slow

Daily Continuation

In the head line I wrote about a short covering rally starts off with a bang as the shorts struggle to cover. In longer term run in prices (long term bias change) which are characterized by one step back followed by two steps forward. Important week in the coming ten days to establish the bias.

Major Support: $3.167, $3.06, $3.00-$2.97, $2.843, $2.727, $2.648
Minor Support :
Major Resistance: $3.192, $3.25-$3.31,$3.39, $3.62, $4.168, $4.461,

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