Thursday, September 6, 2012

Kase and Co. Comments on Natural Gas

The front futures are trading at $2.844, up 4.9 cents.

I believe the analyst in the post below is too bullish for any but the shortest time periods. Despite what the E&P companies were announcing last spring, production has declined, at best, by 1/2% and if demand falls off at all, the difference will balloon into an excess of 7-10 Bcf/day.

Today's injection report at 28 Bcf was below the 32-34 Bcf consensus and despite that bullishness the futures have not popped more than a few cents.
Imagine the bearishness a 60-70 Bcf injection report will have.

From the CME:
October natural gas met key support at $2.61 on August 29th. This was a highly confluent wave target for the waves down from $3.281 and $3.135 and was also in line with the 62% retracement of the move up from $2.30 to $3.281. A sustained close below $2.61 would have opened the way for at least $2.47 and possibly $2.35 where October’s $2.357 swing low and $2.30 contract low would have been tested. Instead, the decline stalled at $2.61 and prices quickly rose to $2.888. This was an indication that the market is not quite yet ready to go on to test the contract low.

The rise to $2.88 was somewhat overextended and stalled on Wednesday. A daily bearish dark cloud cover and intraday divergences indicate a pullback to at least $2.72 is should take place before the end of the week.

Before the move down to $2.61 took place, prices had been trading in a very choppy range between approximately $2.72 and $2.91. It now looks as though prices will settle back into that range and may stay range bound for the near term.

The technicals are well balanced at this point and odds are nearly even for a move in either direction. The range of trading between $2.72 and $2.91 will determine the market’s next move. Upon a close over $2.91 look for the move up to continue to at least $3.03 and possibly $3.14 where the $3.135 swing high would be tested. A close over $3.135 would be bullish for the longer-term outlook. Should prices close back below $2.72, look for $2.61 to be tested again. As stated, upon a close below $2.61 the way will open for $2.47 and then $2.35.

The $2.72 target is the 62% retracement of the move up from $2.61 to $2.888. A close below this would indicate that another major test of support at $2.61 is underway.

NGV12 Retracements to $2.888

Resistance at $2.91 is near the 50% retracement of the move down from $3.281 to $2.61. A close over this would then call for $3.03, the 62% retracement and possibly $3.14, the 78% retracement, which is also in line with the $3.135 swing high....MORE