Category: Weekly Detail

Short Covering Fuels Some of Run

Weekly Continuous

Last week’s gains extended the run that started with the premium afforded the December contract. Total open interest had increased substantially (86,824 contracts over five trading days) while November faded from a 10/08 high at $3.550 to a 10/16 low of $2.922, likely due to aggressive speculative short selling. In the recent weeks prompt gas has closed higher in 10 of 15 trading days with a notable contribution from December’s premium over expired November ($.439), has traded almost $1.50 higher.

December would fail at well – defined resistance provided by the trend line declining from its March – June highs and its declining 20 week SMA. It didn’t. A trend line and moving average violation like that is a serious technical positive. Mentioned it at times during Oct with the Nov contract, but did not occur. During the rally from that above referenced October low open interest has fallen from 1,721,787 contracts to 1,556,062…165,725 (through the 11/06 close, open interest statistics lag one day), 75,982 of that during the five days ending 11/06. Over the sixteen trading days since the peak of open interest the total has fallen in all but one day. To this analyst this is a great example of a short covering run in prices.

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Is It a Reversal

Weekly Continuous

Going to keep this abbreviated as I have other issues with higher priority. Clearly, looking at the chart above you expect commentary suggesting a reversal on the Weekly chart. Not so fast — nearly $.50 of that reversal was the premium afforded at expiration. It may prove out to be a reversal but need to witness after challenges to support. Continue to expect December to fail at resistance, specifically the trend line decline from its March and June highs and its 20 – weeks SMA, Expect December’s premium over expired November to diminish but also expect the new prompt to find substantial support between $3.60 and $3.75.

On more technical analysis expect that prompt gas has traded a higher continuation low…the September low higher than the August low, which is an essential characteristic of an emerging uptrend and the October low higher than the September low. Expect opportunities to buy support during calendar November but expect those opportunities to be fleeting.

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A Slight Bias Moderation

Weekly Continuation

Some reversal earlier in the calendar month (from $3.585 on 10/02 that was confirmed by another reversal from $3.550 on 10/08 for a third time this week’s high was $3.572 and that’s a classic test of and failure at well – defined resistance looks like.

Volume on those three tests of $3.550 – $3.590 has been remarkably similar: 672,699 – 643,006 – 639,225…higher than any other of the trading days during November’s tenure except 10/20 on the gap day. Notwithstanding that a chunk of the 797,173 contracts traded was the result of some folks buying back contracts they had sold short, the gap and the volume spike strongly suggest a high volume low. When November traded into the 10/20 range and tested the 20 – week SMA, (currently the value of that moving average is $3.198, Friday’s low $3.200) it reversed higher, ending the week on a strong note.

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Gap Closed — Declines Extended

Weekly Continuous

November traded down to test the trend line rising from the August and September lows previously discussed recovered, but not sufficiently to close back within the range than had confined it for nine weeks. The lower boundary of that range…+/- $3.09 – $3.10, now becomes well – defined resistance.

The December contract, which continues to enjoy a substantial premium over November (currently $.733, a year ago on the same day December’s premium was $.481), traded down to the upper limit of November’s high volume reversal days on 10/02 and 10/08. $3.55 – $3.59 is well – defined resistance for the November contract and is support for December. Once inside/through that support, expect premium for December to diminish…just as November’s was forfeited. Unless/until December develops the sponsorship to overcome the trend line resistance (declining from its March/June highs) expect it to be guided lower by the trend line and it’s 20 – week SMA The value of that trend line on the December chart is $4.184 and falling about a nickel each week, December’s 20 week SMA is $4.188.

November continues to follow the pattern of the last two Octobers by trading an early high and then falling, although this week’s low on the 17th is a bit earlier. In ’23 prompt November traded its October low on the 23rd which was a higher low, higher than the September low which was higher than the August low. In ’24 November traded its first low after falling from a 10/04 high on the 21st. Just like this year November traded a daily reversal from that low and rallied smartly (from $2.210 to $2.582) but gave up the gain leading into expiration. From a trade perspective –be alert for a short covering rally but expect the same pattern to continue through October ’25.

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

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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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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Still Negative After All These Months

Weekly Continuous

The expiration process went off as expected staying with in the range that was developed during month. A week ago, the premium awarded to November increased from $.266 to $.302. This week that premium rose to $.371. Nov is always premium over Oct, but a year ago when October went to settlement November was awarded $.160, in ’23$ .135. In both ’23 and ’24 new prompt November rallied–in ’23 to a 10/09 high before returning from where it came from then trading back through the low of its first day as prompt on 10/23. The expiration gap left on 09/28/23 was narrowed but not closed and that would have to wait for calendar November.

There is no technical explanation for this year’s exceptional premium other than November’s continuing ability to hold/close above the lower boundary of a trading range that limited declines from around Memorial Day until then prompt August broke down before going off the board at $3.081…and then limited rallies including at the calendar August and to date September highs. Sometimes extraordinary premium for the prompt – in – waiting is delivering a message…sometimes it isn’t.

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Lower Boundary Tested

Weekly Continuous

Friday’s close for October was the lowest of its tenure as prompt (nearly identical to its close of 08/27, the day September went to settlement ($2.888 v $2.886). During that same period the Q4 strip has gained a penny (now $3.304 v $3.293) This type of trade suggests that while the sponsorship is not present to kick off a traditional Q4 rally, there is sufficient sponsorship for the construction of a base.

During calendar ’25 only the March contract traded a high during the last five trading days of its tenure (January ’25 did as well). March fell from $4.476 to settle at$3.906 (January from $4.010 to $3.644). A couple of months, notably May and September, rallied during their last trading day, but every contract month this year has traded lower (seven of the eight to a new contract low or to test the previous contract low, during the closing days of their tenures as prompt).

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Negative Bias Reinforced

Weekly Continuation

The October contract spent ten trading days (from 08/25 until 09/08) running upstream against the seasonal current of price negative including multiple tests of the continuation 50 – day SMA. as discussed in the Daily last week, the prompt managed one daily close above the closely watched declining moving average, the highest daily close for a prompt contract since 07/22. The violation of the declining resistance was not confirmed by higher trade or volume (also discussed) and did not induce the expected short covering extension of the rally from the August low. Then the prompt provided a significant fade into this week’s close.

The failure of October ’25 to generate the sponsorship to extend the rally was different that the pattern of October ’24, when prompt gas closed above the 50 – day and rallied to record the high of its tenure as prompt on the day it went to settlement. The reversal from a higher high with a significant increase in volume, my rough calculation of average daily volume increased more than 75,000 contracts, along with increasing open interest as the prompt fell should be considered a technical negative. The October contract closed back within the range traded during the reversal from the August low (week ending 08/29). The range that week was $2.622 – $3.023 with 2,201,283 contracts traded. This week’s estimated volume was 2,577,0000. This is a strong suggestion that support deeper within that prior week’s range will be tested.

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Similar to Recent Months Trade Begins Defining Range

Weekly Continuous

Although working against the current of seasonal price negative bias, until fading on Friday October gas had closed higher for eight straight days (it has been a while since any contract did that). For the holiday shortened trading week the prompt was the only contract to gain, + $.051, but November’s loss was negligible, $.005. The other ten months of the one year strip lost $.035 to $.071.

The price level attracting sellers was obvious…the declining 50 – day SMA. The highs of three of this week’s four trading days were within a penny of the gradually falling moving average. Interestingly enough, the continuation 50 – day SMA was an influence then as it was during the past week, once breached it became support for a rally that extended through October ‘24’s last trading day. Last year, following October ‘24s rally into expiration new prompt November gas up the gains and returned to test the 50 – day before December kicked off the real Q4/Q1 rally that finally peaked on March 10th.

The consensus of technical indications, which began to improve last week, improved enough to be rate neutral – negative after remaining negative for nine weeks. A week ago neither volume nor open interest confirmed lower lows…this week average daily volume and open interest increased along with October. Prompt gas reversed from more than two standard deviations below the 20 – week. This week’s higher trade tends to confirm that reversal. The daily ATR increased a little…from $.126 to .$131. The weekly ATR fell to $.380. The moderation of volatility may become a significant technical factor.

Major Support: $3.00-$2.97, $2.843, $2.727, $2.648
Minor Support :
Major Resistance: $3.061, $3.16, $3.192, $3.25-$3.31,$3.39, $3.62, $4.168, $4.461,