Daily Call

Can It Look More Bearish?

Weekly Continuous

I through out the comment on options expiration (Thursday Daily) that those that had sold the puts at long term support ($1.50) should not be comfortable. It turned out that they were forced to cover positions during the process. Prices continued further but the damage had been done.

Now we face the new prompt (August) and expect the premium afforded the Aug contract to be challenged. That being said, we discussed the Bollinger study recently and last week’s close was THREE standard deviations below the 20 week SMA. While the weekly RSI is not in extreme territory– it could be setting up for a popular bullish divergence (a counter trend indicator)– time will tell.

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Prices Slide into Options Expiration

Daily Continuation

One would expect that those of you who sold $1.50 puts through the months to be comfortable with that position. That said, one has to wonder where this decline will find support. Never get comfortable in Natgas.

Major Support: $1.611-$1.59, $1.555-$1.519
Minor Support: $1.649
Major Resistance: $1.90, $1.974, $2.019- $2.029
Minor Resistance: $1.722, $1.864-$1.896

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Wake Me When We Get There

Daily Continuous

I have been moving office and home for the last few days and have been blessed with a market going nowhere. I am reminded of what my kids used to say when the got into the car and after the first few miles of excitement, the mantra became “wake me when we get there”. I am developing the same attitude with this expiration process. It is extremely boring, but keep to the range.

Major Support: $1.611-$1.59, $1.555-$1.519
Minor Support: $1.649
Major Resistance: $1.90, $1.974, $2.019- $2.029
Minor Resistance: $1.722, $1.864-$1.896

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Certainly Not In a Hurry

Daily Continuous

Price action gave no indication of directional bias during expiration yesterday, so we are left with boring range trade of the last week. One element of the trade noticed yesterday, was the weakening of the winter trade versus prompt– this may give us a clue of where to trade this market for a little more action than with the prompt as the premium of Dec to July is $1.10. Will keep you posted on an other nuances that this market is providing in a very docile period.

Major Support: $1.611-$1.59, $1.555-$1.519
Minor Support: $1.649
Major Resistance: $1.90, $1.974, $2.019- $2.029
Minor Resistance: $1.722, $1.864-$1.896

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Expect Range to Hold Through Expiration

Daily Continuous

First off– We are in the midst of moving the office to another location which will require interruptions of internet access. I will try to get updates on the Daily out in a timely matter but there may be some issues with getting them in the email. Should you not get the email, turn to the website for the Daily. We experienced some slight problems last week but believe we had them rectified.

Prices broke down and found support at key levels around $1.60. Expect this to continue. Volume was higher week over week and open interest gained towards the end of the week. An interesting development occurred when prices declined at the first part of the week, volume was significantly lower. As price gained some support, volume rose significantly. Not sure what news is going to hit the market and create a directional bias, so continue to play the range.

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Weakness Continues with July Prompt

Weekly Continuous

First off– We are in the midst of moving the office to another location which will require interruptions of internet access. I will try to get updates on the Daily out in a timely matter but there may be some issues with getting them in the email. Should you not get the email, turn to the website for the Daily. We experienced some slight problems last week but believe we had them rectified.

The next comment is “who cares about natgas”. If you didn’t get the last two Daily’s you didn’t miss much as the July contract reversed its historical trend of showing a brief rally in the middle of June only to break down and press the lows just below $1.60. Shockingly, that test failed and prices found the footing to rise on Thursday and Friday. Since the May high of July gas has traded a lower high for the sixth week consecutively, but still remains in the overall range discussed here at great length. With expiration coming up late this week, I am not convinced that July will be extending to far to the strong support surrounding $1.55-$1.51. If it could not garner the selling that after closing at $1.614, not sure, from a technical perspective, what will flip the minds of traders this week. Expect the expiration process to develop a range between $1.60 and $1.80 during the week and end in the vicinity of June’s expiration of $1.722.

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Testing the Low Side is Becoming Fashionable

Daily Continuous
Winter 20/21 vs Prompt

Apologies for the lack of a Daily yesterday, but circumstances would not facilitate. Nothing new to report except that the market is very comfortable with this range (major range between $1.51-$2.00, inside range of $1.60-$1.90) for a couple of months now and what is curious to this observer is the lack of interest in selling the winter down on these moves down. Looking at the chart above the winter has declined almost 5% from the early May high while the series of prompt months (June and July) have shed nearly 26%. The market seems to be saying that summer is no issue — plenty of gas to inject but not sure about next winter. Seems to be a good time for a storage operator. What confuses me, is the lack of selling into the winter with great margins for the storage operators. As discussed in the long term on the web site, something is going to break here.

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Down Draft Continues

Daily Continuous

Prices continued the melt-down as prices broke below the trend line of support from the March and May lows and extended the declines to the lows from May. Now what — as mentioned on the long term outlook- prices could decline beyond those May lows but will find a plethora of buyers as prices go down to the well supported lows. BTW- the Bollinger Band, discussed in the Long Term section, is at $1.56 currently.

Major Support: $1.611-$1.59, $1.555-$1.519
Minor Support: $1.705-$1.649
Major Resistance: $1.90, $1.974, $2.019- $2.029
Minor Resistance: $1.864-$1.896

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Prices Decline to Trend Line Support

Daily Continuous

Prices extended the weak close last week, taking prices down to the support trend line from the March and April lows in the Continuous chart. Each of the remaining summer months brook below there previous contract lows. That said, the winter months did not extend to a lower low for those contracts. The spreads between the prompt and the remaining summer months expanded on the declines. The market seems to be setting up for another month of premium to the the next prompt expanding to the existing prompt into expiration, only to allow the premium to be hammered after the new prompt takes over.

Major Support: $1.611-$1.59, $1.555-$1.519
Minor Support: $1.705-$1.649
Major Resistance: $1.90, $1.974, $2.019- $2.029
Minor Resistance: $1.864-$1.896

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Another Weak Weekly Close

Weekly Continuous

Some interesting developments in the trade this spring. 1) as a contract expires there is a substantial premium afforded to the upcoming prompt. This premiums sets the stage for a high before the weakness and selling smacks the prompt back into the range (discussed here and the Daily) that has held the market for months. 2) declines have taken the market into range and has created a complacency to the trade (note the Bollinger Band study below).

2 Standard Deviation around the 20 Week SMA — Bollinger Study

When this complacency (lack of volatility) occurs in the market- I is not likely to last for very long and creates an environment inducing potential volatility. The difference between the high 2 standard deviation band the lower band is under $.37. It is unlikely that this will hold for very long and the markets premium afforded to the upcoming months and winter will all pressure a resolution to the complacency. Should prices break down and the premiums afforded to the differed contracts come down- the lower band will be broken ($1.579 this week) and volatility is likely to increase. Should prices break above the high band ($1.945 currently), this will likely add significant volatility. Prices have not brought any indications of which scenario will occur — hence the complacency.

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