Daily Call

Expiration Week — Potential Struggle

Daily Continuation

Prices opened with a large gap in the daily charts on Sunday — only to spend the next four hours closing the gap. There is a struggle this week between the historical trend of expiration’s being well bid versus the momentum from last week’s reversal (see Weekly section). This will provide some insight as to June’s tenure for the near term but the longer term bias has not changed as the market remains a bullish bias.

Major Support:, $6.411-$6.392, $6.247-$6.278, $5.27-$5.199, $5.001, $4.40-$4.26, $4.187, $3.972, $3.734
Minor Support: $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $7.346 , $7.427, $7.536

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Expected Correction Occurs

Weekly Continuation

Mentioned in the Daily last week that due to the “blow-off” formation that the gains from two weeks ago would be lost during the correction from the over bought condition. Prices did not quite make the week a technical “outside week reversal” but came close as they set a higher weekly high but not close below the previous week low at $6.247. While the collapse did not facilitate the defined technical term, the reversal after setting the high, was significant and invokes technical damage short term. This sets up an interesting battle– as discussed here for numerous months, price action during the month has been reasonably consistent over the last months as prices have weakened during the mid-month time period, only to find support and perform rallies into the expiration of the prompt contract. April has not provided that similar theme and has come into the expiration from a weakening bias. The trend for an extended period (nearly two years), has been for prices to rally into or during the expiration process (call it 5 days). There seems to be a struggle developing on the May expiration, as prices are weakening while the trend suggests the other direction. Not sure how the expiration plays out, but can express that the summer (Q2) rally has not achieved its goal regardless of the reversal.

The primary reason for that assessment is the open interest trail in the market internals– until a larger increase in participation (open interest positions) is in evidence the gas market is unlikely to trade a final high (September ’21 total open interest reached a high of 1,468,636 and final price high traded three weeks later. Open interest is currently 1,143,359 contracts- preliminary data from the CME, nearly the same as mid – December). As suggested a couple of weeks ago — this may be the end of a series of runs that may continue until June or July.

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Interesting Day of Trade

Daily Continuation

Discussed yesterday about the potential for consolidation and we got a taste of it when the storage report came out and prices fell to just above $6.70 only to spend the remainder of the day working back higher. We are reaching the May expiration and while last month showed significant gains from the 24th until the 28th (falling at the end), the trend continues to show well-bid expiration’s. Would expect that trend to continue until it doesn’t. The action from yesterday confirms my belief that the market is still well supported even with the $1.00+ decline from earlier highs.

Major Support:$6.538, $6.247-$6.278, $5.27-$5.199, $5.001, $4.40-$4.26, $4.187, $3.972, $3.734, $3.63
Minor Support: $6.757, $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $7.346 , $7.427, $7.536

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Phase 1 of Re-Entry

Daily Continuous

The initial phase of re-entry from the blast off (blow off) top started yesterday — but be cautious. The movement down below $7.00 was informative but not the end-all. The bulls may want to try consolidation for movements, but not sure if that starts until prices test the $6.50 area. Yesterday’s low went just down to the lows from Thursday (before the Holiday shortened weekend) only to find support (shocking). Still recommend patience here.

Major Support:$6.538, $5.27-$5.199, $5.001, $4.40-$4.26, $4.187, $3.972, $3.734, $3.63, $3.584-$3.522
Minor Support: $6.757, $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $7.346 , $7.427, $7.536

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A Day Closer to Launch

Daily Continuous

What else can be said after the update in Weekly and Daily yesterday and watch prices up another $.60 yesterday morning– extending the existing over bought conditions. So much fun — but the issues will be coming later when the floor falls out from underneath the buying. Continue to be very careful as the correction will be swift and likely violent. Look for previous Resistance to provide minimal support.

Major Support:$6.538, $5.27-$5.199, $5.001, $4.40-$4.26, $4.187, $3.972, $3.734, $3.63, $3.584-$3.522
Minor Support: $6.757, $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $7.346 , $7.427, $7.536

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Blow Off Seems the Game

Weekly Continuous

Spoke last week that the rally looked to be more of a solid run not necessarily headed to a blow off topping formation. I will correct that assessment after last week’s Holiday shortened trade. Historically, dollar plus rallies (the current case 16.5% over four trading days), are characteristic of a speculative “blowoff” phase. Within that context, beyond the February expiration high there is little or no definable conventional resistance distinguishable on the continuation chart and there wasn’t the last week of January either.

An increase of 100,000 contracts during late March and early April brought total open interest back to approximately the same level that existed at or shortly following the rallies in Jan, Feb and Mar. Those rallies were all followed by corrections (Weekly Chart above) expect the same albeit from a dramatically higher price level.

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Whoa — Be Careful

Daily Continuous

The failure of May gas to correct before going off the board would be a departure from the pattern of each expiring contract for more than a year…as would a failure to rally into expiration. Expect both to happen over the next eight trading days. Given the strength into Thursday’s pre – holiday close further extension of the rally should not be a surprise, but traders should be alert for a reversal as discussed in the Weekly area. My guess is that a good chunk of last week’s gains will be shed.

Major Support:$6.538, $5.27-$5.199, $5.001, $4.40-$4.26, $4.187, $3.972, $3.734, $3.63, $3.584-$3.522
Minor Support: $6.757, $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $7.346 , $7.427, $7.536

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Keeps On Rolling

Daily Continuation

What can we say, the bullish move continues regardless of the over-bought conditions and now is challenging 3 standard deviations over the 20 week SMA. Notice on the chart below, that prices are approaching that extreme level. Can it get there — absolutely but also notice that it does not stay that exposed for very long.

Weekly Continuation – Bollinger Bands 2 and 3 Standard Deviations above 20 Wk SMA

A few of you contacted me in the last week regarding the run and how far it can go– I have tried to explain that it will go as far as the buyers continue to support it — but as I mentioned the last couple of Daily’s, the market will signal the conclusion. Some others have questioned is this the Q2 high– at this point I don’t see this as a culmination of the early summer run – but rather a rally within the med-term bias.

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Yet A Higher High — But Failed to Hold Gains

Daily Continuous

Can not claim that this leg of the run is completed — but yesterday gave a slight idea that the bulls may be running low on fuel. Off to a big gain in the morning, trying to test $7.00, only to spend the last 3 hours giving it all back and developed a bearish daily reversal off of a new high. Daily reversals are prevalent in gas so would not hang your hat on it but the volume on yesterday’s reversal was nearly 20% higher. As mentioned yesterday, the trade though the week’s end is key for the next couple of week’s price action.

Major Support:$5.27-$5.199, $5.001, $4.40-$4.26, $4.187, $3.972, $3.734, $3.63, $3.584-$3.522
Minor Support: $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $6.538, $6.757, $7.346

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That Is What I am Looking For

Daily Continuous

Big extension yesterday to set a new high, while volume was lighter than Friday (lightest of last week). This may be a market reaching a short term high (for whatever reason) but won’t know until the week is finished from a technical standpoint. There are also very few technical areas at resistance levels as the market blew through them in Feb expiration process.

Major Support:$5.27-$5.199, $5.001, $4.40-$4.26, $4.187, $3.972, $3.734, $3.63, $3.584-$3.522
Minor Support: $6.00, $5.063, $5.04, $4.88, $4.60-$4.557
Major Resistance: $6.538, $6.757, $7.346

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