Category: Weekly Detail

The market seems to be wanting to define a low to, what is likely, the new range and two daily tests of $2.69 and just below. Early trade on Sunday night does not indicate any early preference. The declines last week stopped at support from the 200 day SMA of the April contract (see below).

This week will likely provide indication whether this is serious support zone and the lower end of the range.

Of the last thirty years, there has been five other years that March settlement was the highest of the Q1 (historically weak period) months — ’03, ’05, ’07, ’08 and ’13.  In that 5 year sample only March ’03, which went off the board at 9.133, was the highest settlement of the year.  Multiple monthly settlements exceeded March’s in the other four years, higher Q2 prices were traded in all and all eventually traded to highs higher than that of the previous year’s Q4 high. March settlements were part of an uptrend that had begun during the spring or summer of the previous year and had not yet entered its ending phase.  If you recall, I mentioned history last fall about the strength of the Sept contract during August from a historical perspective. Being honest, ’13 was in the group mentioned about the perspective for higher trades in winter and the highs were set in Feb ’14 after that strong Aug showing. The market did set a “high” in Feb this year but with the differed months continuing to show strength– I am not convinced that the rally is over.

Support:$2.764, $2.74, $2.65, $2.373–$2.356,$2.255-$2.176
Minor Support: $2.71, $2.60-$2.554,$2.483, $2.162
Major Resistance: $2.98-$3.05, $3.082, $3.316-$$3.396, $3.486
Minor Resistance:$3.172

Price exploded out of the recent range trade last week, primarily fueled by the weather conditions. Breaking above the high end of the range between $3.00-$3.05 only to challenge the highs from last November and then retracing back to the old resistance area at the close. Still, prompt gas finished higher for the seventh time in eight weeks. While closing above the historically important January high- March extended the rally to test its October and November highs. The now soon to expire contract retreated from that resistance but held short – term moving average support and on a closing basis the daily downside reversal highs of 02/05 and 02/11. Prompt gas ended the week only a couple of cents above where it began…3.069 v 3.046, but with increasing volume and open interest. Price, volume and open interest moving in the same direction suggest that the uptrend is sustainable likely to be extended. Further evidence of sustaining this rally is offered by another gain in the coming summer strip that closed nearly a dime higher at 3.050. This is above highest close during October rally. Unless usually March gas gives up a significant share of this week’s gain over its last three trading days, expiration will be above the highest settlements of Q4 (November 2.996, December 2.896).

From a technical perspective, the October high is critical. Failure to trade through that high before a significant decline will not doom the bullish bias trend (discussed here in the past)but will suggest the likelihood of the perhaps long period of a trading range until prompt gas is able confirm another higher low . On the other hand- a low lower than the December low would indicate that a renewed downtrend is in progress.

Last week’s trade was “inside” the prior week’s range and the nearly identical open and close.  Prices continue above the 10, 20 week SMA, on a closing basis for the last two weeks. Resistance is clearly defined by the high of last week and prior week.  If that resistance is overcome expect a test of three weekly highs March traded between 10/19 and 11/02 (3.318, 3.320 and 3.316). Short of that break out event- expect the range trade to be re-in forced between $2.70-$3.00.

Starting to see some confirmation of the stronger prices as the total open interest and volume has gained over the last two weeks as prices have risen. Have discussed over the last two months about the bias change (bullish) that commenced after the multi-year low that posted at the end of June. Those discussions have centered around the series of higher high and higher lows. One element that has been lacking was the market confirming the bias change with the volume rising and open interest rising simultaneously. The volume two weeks ago was the highest since last March followed up with a strong volume last week. Both those weeks were met with gains in total open interest. Of greater interest is source of the gains– look at the following two charts– notice that some of the volume gains as prices rallied were associated with short covering by the speculative crowd as prices showed strength two weeks ago.

Three Friday’s ago, prompt February traded down to new lows for January.  That weakness brought an expectation of lower prices when trading resumed.  Rather than follow through to the downside prompt gas opened and left a small gap higher.  February hardly looked back before settlement .314 higher than that weak previous week’s close.  Last Friday, new prompt March didn’t give up all the expiration week gains but traded a daily reversal lower (that was discussed), dropping .146 from the day’s high and ended the week only a penny off the low.  The declines last week, with the selling, brought a similar expectation, March would be offered lower when trading reopened.  Instead, the first trading day of February began with another small gap higher (2.710 – 2.712). 

Needless to say, after last week’s weak close, expect prices to open higher on Monday, the question remains if the market has the support to close above the key resistance area around $3.00. Twice, last week, prices rallied above $3.00 only to find significant selling and resistance that sent prices down below $2.90 and into support zones. Will a third time be the charm?

Regardless of the expiration of the Feb contract, the price action could not wait to test the low end of the support that the Feb contract had confirmed during its term as prompt. The declines are still within the recent range and have had no impact on the long-term implications that the market has provided since last July. See the chart below which was first sent a couple of months ago.

The series of higher high and higher lows is the exact opposite of the declines experienced in 2019 and early 2020. That period was symptomatic of a series of lower lows and lower highs. As discussed, this market continues to be changing its long term bias from negative to more positive.

The weekly chart above shows the weekly reversal from the December low followed by a gap higher to begin ’21; the two weekly closes above the trend line declining from the October high and December high; and this week a close above the ten week SMA. While these actions could lead to a bullish bias to trade, still expect another test of support and the area around $2.60 has become a well defined area for initial support. From there the gap between $2.566 and $2.547 which still exists in the Daily and Weekly charts.

Last week’s close occurred with an increase in weekly volume but additional declines in open interest. The chart above shows the open interest declines occurred partially from the speculative interests leaving the market. It is interesting that the speculative length entering the market offset the losses from the shorts leaving the market. For the market to achieve significant gains the open interest will have to start gaining as well as maintaining the gains in volume.

The year’s trade commenced with a small gap between 2.547 and 2.626, and it appeared it would be filled when February retreated from the 20 Week SMA and narrowed the to 2.566. Surprisingly, price declines stop and closed not far off its low and remained open through the weekly close.  February regained the continuous 20 week SMA, and spent the remainder of the week testing the continuation 50 day SMA, each day trading ended higher than it began suggesting increasing sponsorship. 

The week’s gain were powered by significantly higher volume, highest in a months (see chart above). That said, the comparison should be viewed with a skeptical eye given the modest volume of the last two holiday shortened weeks.

That was a Holiday week as prices gaped open ($.26) lower only to spend the remaining days erasing that loss and ending the week $.015 higher. As expected all of this action occurred on below average daily and weekly volume.

January has had a strong history since ’92 of starting a month with a gap up or down. Sometimes (like last week) the gaps happen before during or after the holiday period. After what appeared to be a devastating gap lower to a three month low, prompt gas managed to trade a second straight reversal week and finish higher. It should also be recalled the historically importance (compared to other calendar months) is attached to the January extremes. For example, in 16 of 30 years the Q1 high has traded during January, on the other hand –14 times the January low has been the Q1 low. For some unknown reason, January trade has significant impact for prices during the year.

The price collapse last week suggests that prices will want to re-test the support gap from the Nov contract at $2.37. Closing near the lows of the week on lighter than average volume (Holiday related) does little to support the near term action. Support will likely be found from the high end of the gap ($2.377) down to the low end of the gap at $2.10. Mentioned last week that the market was susceptible to volatility and that can be either up or down as it heads into another expiration and Holiday week.

Support: $2.425,$2.373, $2.255-$2.176
Minor Support: $2.162
Major Resistance: $2.55, $2.74-$2.789, $2.98-$3.05,
Minor Resistance: