Daily Call

All this week prices moved either side of $6.00. Monday was a big rally to test resistance and failed — Tuesday a big decline (eliminating the rally) to test mid level support only to fail with the $6.00 number just about in the middle. Guesses are there seems to be some sort of equilibrium, in the traders eyes and positions, to facilitate this behavior. The range has held through weather forecast changes, news about the LNG plant a a bearish storage release. That is a lot of bearish headlines and here we sit in a tightening range. Work the extreme ends.

Major Support: $5.61-$5.44, $4.716, $4.705-$4.68
Minor Support: $5.47
Major Resistance: $6.314, $6.456, $6.74, $7.18, $7.532, $7.71-7.75, 8.021,

Heard from some of the fundamental traders yesterday about the one day up — one day down– one day up phenomenon that has ruled trade this week and my suspicions were confirmed that the movement was due to the changes in the coming two week forecasts. Happens frequently in the shoulder seasons for gas and it makes range trading a cautious strategy. I like sticking to the major range and being patient to see if the support and/or resistance areas hold. The other reason for this approach is the stop losses are usually very close. The market was banging up at the gap again yesterday, failing once again– so do we go back and test support? You can make some money in this $.60 range.

Major Support: $5.61-$5.44, $4.716, $4.705-$4.68
Minor Support: $5.47
Major Resistance: $6.314, $6.456, $6.74, $7.18, $7.532, $7.71-7.75, 8.021,

Mentioned earlier in the week that the gap from a week ago Monday is a low risk sell– little did I know that the trade would profit and cover a portion at near term support in one day. I thought I would need to hold that short until the storage report — but that was not the case. Looking at the total volume from Monday, it was well above the recent total volume for the last week of trade days. It will be interesting to look at the volume from yesterday when it becomes final. The rally may well have been associated with short covering — but then did the shorts come back in yesterday? We shall see.

Major Support: $5.61-$5.44, $4.716, $4.705-$4.68
Minor Support: $5.47
Major Resistance: $6.314, $6.456, $6.74, $7.18, $7.532, $7.71-7.75, 8.021,

What is with this– all you fundamental folks are telling me weather forecasts are bearish for November and Storage will be HUGE at the end of the month– what gives with a $.50 rally. Oh- one reader blamed it on the early and Sunday trade and not the general market– Huh– yo fool — if it was so false and misread bearish bias, why did it not sell back in the full market– seemed like a great place to put shorts on. I digress– no clue why the rally but will mention that the market had declined for the month of October — and prices will not go down for ever in spite of some of your wishes. Would look to sell the gap until it closes above it– then flip and length for the top side of a new range. If it does close above it make sure you have some shorts out there.

Major Support: $4.948, $4.903, $4.716, $4.705-$4.68
Minor Support: $5.47
Major Resistance: $6.314, $6.456, $6.74, $7.18, $7.532, $7.71-7.75, 8.021,

Mentioned last Friday, that with the bearishness associated with the Nov trade — I fully expected the declines to continue and eat the premium associated with the Dec contract. While some of the premium was devoured, the market left a fair amount of meat on the bone (so to speak). Now, much to my surprise with all the bearish bias — prices are up in Sunday night trade? Have little explanation for this behavior, except as mentioned in the Weekly section — sellers may have dried up.

Major Support: $4.948, $4.903, $4.716, $4.705-$4.68
Minor Support: $$5.47
Major Resistance: $6.314, $6.456, $6.74, $7.18, $7.532, $7.71-7.75, 8.021,

Some slight convergence between the Dec and Nov contract as the Nov contract expired. Still left with a significant gap and would expect that the differential will be closed in the near future due to the recent bearish bias in the last month. Would expect that buying the the lows of the last month down to $4.90 with tight stops a potential strategy or selling the current levels down is also an alternative, but need to be careful as the strength in the Dec contract during the slaughter of Nov raises concern.

Major Support: $4.903, $4.716, $4.705-$4.68
Minor Support
Major Resistance: $6.314, $6.456, $6.74, $7.18, $7.532, $7.71-7.75, 8.021,

Prices retreated a little during options expiration, but nothing conclusive was determined. The market is defining a “new range” and how it determines the high side and low end has some development yet. At any rate, and expiration on the same day as the storage report is likely exciting.

Major Support: $4.903, $4.716, $4.705-$4.68
Minor Support
Major Resistance:$5.32-$5.37, $6.314, $6.456, $6.74, $7.18, $7.532, $7.71-7.75, 8.021,

While the spread came in a couple of pennies at the time of this writing, I am still concerned about adding positions, whether long or short, while the intentions of the market deciding on the differential (closing or ignoring until Dec becomes prompt). Need to be careful and cautious during this period. There are a couple of different ways this game can turn out from a technical perspective and they revolve around the highs of last week, which coincides with the gap from last week.

Major Support: $4.903, $4.716, $4.705-$4.68
Minor Support
Major Resistance:$5.32-$5.37, $6.314, $6.456, $6.74, $7.18, $7.532, $7.71-7.75, 8.021,

As alluded to, the over sold condition of the market extended early Monday morning to find support and develop a counter trend rally. Nothing major but a reversal day was over due for this market. How far does it proceed is anyone’s guess during the expiration process. After 5 consecutive declining days, it should be expected that prices rebound 33-50% of last weeks declines. More interesting to me is the dramatic and large spread between the Nov and Dec contract. During last week’s decline this differential got large (see chart below).

That differential blew out last week, expanding 25%. What happens— does Nov chase Dec during expiration of does Dec collapse and give up the premium after becoming prompt. My best guess is a combination of both.