Category: Weekly Detail

No Change Yet

Weekly Continuous

Though nothing was defined as changing the lower low on continuous prices and lower RSI (momentum indicator) confirmed that the bias is still bearish. In the Daily Continuous with RSI you will notice a lower low in price but not confirmed in the RSI- the first steps in creating a potential bottom. Lets review the last week:

After the long weekend March gas gapped lower -down into the support zone between $1.500 and $1.600, and to $1.522. From there prices reversed higher to record the largest one day gain of its tenure as prompt. A round of pre expiration short covering propelled extremely oversold March (mentioned previously) to back to back daily gains. From there the short lived rally predictably failed just above the a continuation trend line declining from the January highs. The now soon to expire prompt gave up all of the modest gain to end the week $.006 lower. March’s sixth straight weekly decline left prompt gas still within the zone of support that limited declines in ’96, ‘97, ’98, ‘ 99, ’01, ’15, ’16 and ’20.

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Perhaps A Change Initiating

Weekly Continuous with RSI Study

March closed the day higher by $.028 for the first time after nine consecutive lower daily closes since the reversal following the failed trend line violation on February 3rd. Since February expiration March has closed lower in all but three days of its tenure as prompt. This past week, on the 8th day of those nine straight lower closes March traded into the historical support zone that has been defined as $1.50 – $1.60, trading into that zone for the next two trading days, trading as low as $1.573 closing below $1.60 once.

The daily ATR (essentially the average daily trading range for the last fifteen days) has fallen from $.312…the highest calculation since 02/02/23, to $143. This is the lowest calculation since 12/11/23 ($.133), two days before the beginning of the rally that 18 trading days later resulted in the January high ($2.235 – $3.392). While March has been the prompt contract total open interest has increased more than 140,000 contracts (the total number of contracts outstanding had already increased more than 117,000 contracts from 12/26 to 01/30). Together those increases (257,216 contracts) bring the total of contracts outstanding to 1,611,826, the highest total since 10/19/18 which was just before an extension of the Q4 ’18 rally from $3.102 to$4.929 that took just thirteen trading days.

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Weakness Into Break Down

Weekly Continuous

March collapsed through and closed below support presented by the February – March – April ’23 lows. Friday’s close was the lowest since July ’20. March reversed from $2.127 and five straight lower closes I thought that prices would hold the support zones and form the construction of a trading range that would support a historically consistent Q2 rally. From that support there would be a annual Q2 rally which is still expected but the late winter/spring rally, will certainly commence from a lower price than expected, and likely be less than average (the ten years average is about 50%). You should also expect that the rally will be primarily be powered by short covering.

As mentioned last week, it does not get a lot more technically bearish than an “outside” month with a close below the previous month’s low with increasing volume. Before getting into a discussion of historical support, it is interesting that it took 41 weeks for prompt gas to trade from ‘23’s weekly closing low ($2.035) to the end of October weekly closing high (a gain of $1.438). It then took five weeks to fall from $3.473 to$2.469.

Stepping back a little from that more or less recent volatility, since the high trade on 10/30 ($3.630) prompt gas has fallen $1.813 or almost exactly 50% in fourteen weeks (normal cycle length). Over the last twenty years the average decline from Q4 highs to a Q1 (late winter/early spring low) is 41%, the ten years average is 44%, five years 48%.

Four years in June ’20 there was a suggestion to extend commitments as long as someone could be found to take the other side. That turned out ok. The key to technical analysis is to remain consistent…and to learn from history. Since the thoughts that the ’23 lows may and last week’s decline eliminated those thoughts, I am not willing to accept that we are yet approaching an analogous point. The trigger in June of ’20 was a reversal from a lower low which created multiple momentum divergences from a severely oversold condition (that’s the most common way for the market to communicate that it has traded to an unsustainable low). March gas is short – term oversold and the speculative short position is close to out of hand…total open interest is about the same as it was at the same time in ’20, before the bottom in June that total fell about 300,000, so don’t be surprised if there is short covering rally…which fails at a lower high, but the market is not that close to long – term oversold. For now, the target for prompt gas seems to indicate $1.50- $1.60.

Major Support:, $1.795-$1.766
Minor Support :
Major Resistance $2.00, $3.00, $3.16, $3.48, $3.536, 3.59, $3.65

New and Different?

Weekly Continuous

The February tried to rally but failed at declining resistance, reversed from that lower high, again, and faded into expiration. Settlement at $2.490 was $.131 less than January and $.247 less than the average monthly settlement during ’23. New prompt March, which was offered at a $.443 discount when Feb went off the board was left to set the important January low at $2.037 on the last trading day of the month. The “expiration” gap accounted for the first ever “outside” January (prompt gas traded through both the calendar December high and low). It does not get a lot more technically bearish than an “outside” month with a close below the previous month’s low with increasing volume. 9,899,538 contracts changed hands during December, 12,006,048 during January. It is interesting that the last time that much volume traded during a calendar month was February and March of ’20, when both month’s volumes were slightly higher as prompt gas began to construct a multi – year low. Despite trading within a narrow range (an average of $.102/day vs a 15 day ATR of $.264) March managed to trade two “outside” days. Back to back “outside” reversal days are rare and suggest market uncertainty. The new prompt ended the week by recovering from the lowest low traded since April 14th ($2.021).

March, is sitting right on top of serious conventional support…four consecutive monthly lows from February through May ’23 ($1.967, $1.944, $1.946 and $2.031). Unless March can get through all that support in a hurry it has the serious chance of drawing out speculators to challenge the resistance levels due to the markets inability to break lower. This may trigger another round of short – covering.

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Going to Set Some Rules and Ranges

Weekly Continuous

Momentarily, I thought my analysis last week in the Weekly was spot on as the differential between Feb and Mar narrowed down under $.30 for a very brief period of time. After the previous week’s weak close, the market strongly suggested February would be offered lower (hence the confidence in closing the differential). It was almost a given that any rally by the suddenly oversold prompt would be sold at a lower high. Surprisingly, February recovered as much as it did, but not surprised when it reversed lower from $2.884 (the continuation 20 – week SMA was $2.877). The violated daily trend line and important moving averages provided daily closing resistance but little else can be drawn from the wide ranging days other than the to date calendar January trade low is higher than the December low.

It is difficult to put a bullish spin on the price action last week but the March chart develops a few factors that serve to mitigate an overly bearish outlook. Perhaps the most significant of those is that March is sitting atop support that is more distinctly defined than at any time since the spring of 2020,(see March chart below) and before that during the late winter/early spring of 2016. Won’t spend a lot of time on those historical levels of support and how they were tested and held, currently, but long time readers will hopefully recall long past discussions of the consistency of prompt gas to trade in four year cycles. While not always exact…some a little longer, some not quite as long, that cycle can easily be observed since the beginning of natural gas trading in the spring of 1990…most recently 2012, 2016, 2020…2024??

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Ya Think the Bias Is Bearish

Weekly Continuous

More often than not a price spike with a significant contribution from short covering is followed by a price vacuum once the buying that caused it is exhausted, and at least a retracement of the gain. A decline of $.794 (nearly 25% of price at last week’s close) would be considered outside the range of expectations of this analyst. Rather than opening higher after the three day weekend, February was immediately offered $.20/dt lower. There was no gap because of the wide daily ranges of last week’s rally, but the best February could do was a trade to $3.189 ($.124 below the previous Friday’s well – bid close-which turned out to be the high for the week. There was a short – lived bounce off the 50 – day SMA but nothing that resembled one at the trend line drawn from the December lows, which I had thought would guide success prompts higher. Nope- February fell unabated through multiple levels of conventional, moving average, trend line and moving average support. By the week’s amply offered close , prompt gas had returned to the band of weekly closing support ($2.469 – $2.548) that has limited every decline since the recovery from the June low.

While volume was lower during the decline last week — I guess you could consider it kind of a dubious positive technical factor. Although less than a week earlier turnover was higher than average. It also certainly appeared that surviving speculative short sellers returned with a vengeance…open interest for the three trading days between Tuesday and Thursday (open interest statistics lag one day) increased 28,363 contracts. Were just setting up for the next round.

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Strong Finish –Trouble Brewing

Weekly Continuous

February quickly retreated toward targeted support ($2.600 and $2.700). After trading the low of the week($2.694) February recovered and developed a dramatic bout of short covering spiking to a high of $3.392 with exceptional volume. Having already traded a range of $.698…the widest range for any two days since the beginning of the collapse from the December ’22 high, February traded within Tuesday’s range ($2.884 – $3.392) for the balance of the first full week of ’23, but again finished the week with a substantial bid. February posted its highest close since the first Friday of November, just short of the resistance presented by the lower boundary of a range the current prompt traded in from April through October which includes the gap left on the February chart on November 6th $3.635 – $3.681 and February’s 40 – week SMA…which it failed at twice before breaking down. On a continuation basis prompt gas closed just below a band of weekly closing resistance between $3.330 and $3.473 ). The daily continuation gap is $3.407 – $3.452 and two standard deviations above the 20 – week SMA is $3.462. That represents a whole lot of areas to bring sellers back, Unless the prompt can extend its rally…as another strong weekly close suggests it will, after posting the highest daily close since 11/03 ($3.515), it is in danger of a short – term momentum divergence…and in any event is extremely short – term overbought. Expect selling.

Something that caught my eye and so I checked previous years and it failed to turned up any other year that there was anything close to the premium over March at February has at expiration. So, the question becomes whether February gives up much of that premium over its last nine trading days or March begins to catch up. Based on my comments and foregoing analysis of resistance, extension nearly two standard deviations above the twenty week and the extreme short – term overbought condition expect that February retreats from a challenge of the October highs to redefine support while March and the Q2 months begin to find more sponsorship.

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A Bullish Start to 2024

Weekly Continuous

The prompt opened at $2.605, creating a daily continuation gap above Friday’s high of $2.561 Despite February quickly filling the gap the indication that it had brought was validated by a reversal and follow through that left the prompt above January settlement and the first trading day of January high. Extension of the rally to test, and close above the continuation 50 – day (for the first time since 11/16), plus a weekly close above the 10, 20, and 40 – weeks SMAs AND the December high leaves $2.524 the odds on favorite for the January low.

While all of that bullish technical data points is important –it is not intended to suggest that prompt gas has kicked off on one of its periodic winter rocket rides, nor that the perennially amply offered February contract won’t back and fill from this first week of ‘24’s strong close. There is an abundance of well – defined resistance including but not limited to 50% retracement of the decline from the October – Q4 high and the violated trend line drawn from the April – May – June lows, between $2.906, the late Friday high of the holiday abbreviated week, and $3. It does suggest a change in the way traders are approaching the gas market from actively selling rallies to buying during bouts of weakness to test progressively higher levels of support. Since the 12/13 trade and reversal from $2.235 prompt gas has traded higher lows (defined as a higher low followed by a higher high) of $2.385 (12/19) and $2.412 (12/28) and now $2.524 (01/02) can be added to that list.

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First Action of New Year — History

Weekly Continuation

Have not sent a Weekly for two weeks due to the markets decision to trade in a fairly consistent range and that continues at the current writing. I wanted to share with the thoughts and history of a trader who provides me access to some of his thoughts during the year. I can promote and endorse his historical analysis as he has been tracking it since the gas market started trading in the early 1990’s,,,,

…each year at this time I write a review of what I came to call the January Phenomenon…because of its consistency and disproportional importance compared to the other eleven calendar months.  The following is not a lot different from the twenty five or so that it follows.

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Interesting Trade Week

Weekly Continuous

Prices almost formed a classic DOJI pattern in during the week– that is a pattern from the Candlestick analysis and I have talked about it occasionally here. The pattern is based upon the Japanese technical analysis that discusses the traders open at a price and then extend either higher or lower during the week only to give up the gains or declines by the end of the week to finish where the market started the week. The analysis is based upon the a military exercise where the gains in the beginning of an offensive are achieved but by the end of the period– all gains are given back.

Last week almost formed a good DOJI pattern but the price action did not go back up and close at the price level where prices opened the week. While close — it cannot qualify as a true DOJI week — so what does it mean one way or another — more importantly — what does it mean for the upcoming period?

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