Author: Dean Rogers, CMT

Dean Rogers, CMT is the general manager of the Kase Call Center in Albuquerque, New Mexico. He oversees all of Kase and Company, Inc.’s operations including research and development, marketing, and client support. Dean began his career with Kase in early 2001 as a programmer but has developed into Kase’s senior technical analyst. He writes Kase’s award-winning weekly Crude Oil, Natural Gas, and Metals Commentaries. He is an instructor at Kase's classes and webinars and provides all of the necessary training and support for Kase's hedging models and trading indicators for both retail and institutional traders.

Declines in U.S. crude oil and gasoline inventories, a weaker U.S. dollar, and recent indications that OPEC and other major producers could take measures to stabilize prices are reportedly catalysts for last week’s near eight percent gain. However, some pundits believe the recent rally may keep the market oversupplied as higher prices could encourage more drilling. This point was emphasized by rig counts increasing by 10 last week to the highest level since February.

From a technical perspective, October WTI settled above key resistance levels at $48.0 and $48.7 late last week. The move up is poised to continue above $50.0, but is in desperate need of a correction. The Stochastic has been overbought, and on Friday, an evening star setup formed.

On Monday, the correction WTI has been waiting for began. Friday’s evening star was confirmed on Monday when October settled below $47.58. The Stochastic’s %K line is falling below the %D line, which is also negative. These factors indicate a deeper correction to at least $46.6 and possibly $45.8 should take place this week. The move down will likely be choppy and corrective, but should extend at least a bit more before the move up continues.

The key support level is $45.8. This is because $45.8 is the 38 percent retracement of the move up from $39.96. A normal correction should hold $45.8. A close below this would call for an extended correction toward the 50 and 62 percent retracements.

Look for initial resistance at $48.3 and $49.0. These are near Monday’s midpoint and open. The $48.3 level will probably be tested in early trading, but should hold. A close over $49.0 would indicate the correction is complete. This would in turn open the way for $50.1 and higher.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intraweek updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Late last week, September natural gas fulfilled important support near $2.51 when prices fell to $2.523. This is the 1.00 projection of the wave down from $2.99, the 50 percent retracement of the move up from $2.009, and the 62 percent retracement from $2.195. The confluence of targets around $2.51 indicate it is a potential turning point for natural gas.

Prices have risen from $2.523 to $2.648 so far, but the move has been extremely choppy and shallow. As a result, the move is most likely corrective. This is accentuated by the formation of a bearish pennant on the intra-day charts. Pennants are continuation patterns that indicate the prior trend should continue. In this case, the pennant favors a break lower. A close below $2.57 would confirm the break lower out of the pennant and open the way for another test of key support at $2.51.

September natural gas has worked its way to important resistance at $2.64, but has not been able to close over this level yet. $2.64 is the 0.618 projection of the primary wave up from $2.523. A close over $2.64 would call for key resistance at $2.68. The $2.68 level is near the 38 percent retracement of the move down from $2.911 and is the midpoint of last Tuesday’s candlestick. A close over $2.68 would be a strong indication that prices will settle back into a trading range.

It is a tight call right now, but until there is a close over $2.68, odds favor a continued decline.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary and intraweek updates provide a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

Stock, commodity, foreign exchange, and fixed income markets are complex beasts that few can tame. There is no one right way to make trading decisions. When it comes to speculating on the direction of a given security traders generally have two ways of analyzing information and making trading decisions: fundamental analysis and technical analysis.

The first, and most traditional approach, is fundamental analysis. This is a broad topic and discipline. At the core, fundamental analysis revolves around the examination of supply/demand data, economic and financial data, and other qualitative and quantitative factors to determine the intrinsic value of a security. Fundamental analysis typically has a longer-term horizon, and is primarily used to make longer-term trading and investment decisions. In the long haul, the fundamentals rule.

The second approach, and the focus of this blog, is technical analysis. This is also a broad topic and is not as widely practiced as fundamental analysis. However, that is quickly changing.

The idea behind technical analysis is that all factors are discounted in price. If supply rises and demand falls, prices should go down. If there is a supply disruption, a popular new product, a positive quarterly earnings report, or even a positive “gut feel” traders will buy and when they do prices will go up. Essentially, technical analysis involves the reading and interpretation of price charts to make decisions of when to buy or sell, and whether or not prices will rise or fall. Technical analysis is very good for short term analysis and trading decisions.

The popularity of technical analysis is relatively new. The roots of modern day technical analysis date back to the days of Charles Dow, and Dow Theory. Some pundits even theorize that the Japanese used the basis of technical analysis to trade rice. However, the concepts of technical analysis were viewed as a voodoo like practice and shunned by most Wall Street trading houses, banks, and investment firms until the 1990’s.

Technical analysis has become very popular over the past three decades, and those with a firm grasp on both technical and fundamental analysis are in high demand. Today, most seasoned market analysts and traders recommend that both a fundamental and technical view be used. By doing so, a trader or analyst can harness the best of both worlds and create a very effective approach to determining market direction, trend strength, key support and resistance, and potential turning points. All of these factors can be used to create a reliable and effective trading strategy that will give you and your firm an advantage over competitors.

September WTI crude oil’s settle above $44.4 Friday and $45.7 Monday has opened the way for the move up to continue. The Stochastic has risen into overbought territory, but there is no technical evidence the move will stall.

The next targets are $46.3, $47.0, and $47.9. The $47.9 level is a crucial confluence point split between the 62 percent retracement of the decline from $52.73 and the 1.618 projection of the wave up from $39.19. A sustained close over $47.9 would confirm the market is moving toward bullish territory again.

A pullback may take place soon. However, support at $45.3 should hold. This is near Monday’s midpoint. Key support for the near-term is $44.7. A close below this would call for an extended downward correction to at least $44.1 and possibly $43.5.

September natural gas’s correction down from $2.99 is extending after breaking lower out of a coil formation. Tuesday’s close below $2.66, the 0.618 projection of the wave $2.99 – 2.591 – 2.911, opened the way for the 1.00 projection at $2.51. The $2.51 target is also the 50 percent retracement of the move up from $2.009 to $2.99 and the 62 percent retracement from $2.195. Unless there is a bearish shift in underlying fundamentals, $2.51 should hold.

The KaseCD, a second derivative momentum indicator, is setup for bullish divergence on the daily chart. First resistance is $2.63. The key level for the near-term is $2.68. This is Tuesday’s midpoint and the 38 percent retracement of the decline from $2.911. A close over $2.68 would indicate September natural gas will most likely settle back into the recent trading range.

September WTI crude oil’s correction up from $39.19 gained ground on Monday when it settled above $42.8. Media outlets indicate the rise was due renewed hopes that OPEC members might consider freezing production levels. OPEC announced on Monday that they would hold informal talks at an energy conference in September.

That said, from a technical perspective, the move down was due for a correction. September WTI briefly moved into bearish territory last week when it settled below $40.4. However, a highly confluent and important $39.2 target held when the $39.19 swing low was made. The Stochastic has since risen out of oversold territory, and several intraday charts confirmed bullish momentum divergences.

Friday’s hanging man candlestick pattern was negative by Monday’s close over $42.8. This opens the way for $44.4. This is the 38 percent retracement of the decline from $52.73 to $39.19 and an important decision point for the near-term. If the move down is going to continue within the next few weeks, $44.4 should hold. However, a close over $44.4 would call for an extended correction and could be an early indication that another long-term bottom has been made.

As the move up extends over the next few days, look for near-term support at $42.5, $41.8, and $40.8. The $42.5 level will probably be tested early Tuesday, but should hold. This is near Monday’s midpoint. Key support is $40.8 because it is the 62 percent retracement of the move up from $39.19. A close below this would shift odds in favor of testing $39.19 again.

September natural gas is trying to break higher out of the month long trading range. Two important boundaries have been established within the range. First between $2.71 and $2.84. Second between $2.66 and $2.96. Prices rose above $2.84 in early trading Wednesday, but closed just below at $2.839. Nonetheless, prices will likely push for at least $2.91 and possibly $2.96 tomorrow. A close over $2.96 would call for the bullish trend to extend to targets above $3.00. Given the strength of the moves up today and last Thursday, it looks as though prices will rise to new recovery highs soon.

That said, a break higher out of the range in the near-term will likely hinge on tomorrow’s EIA Natural Gas Storage Report. A larger than expected build (some are looking for a draw in tomorrow’s report) could open the way for another test of $2.71. A close below this would then call for key support at $2.66.

With all technical factors considered, odds favor the move up tomorrow. September will need to close over $2.91 to keep the momentum it gained today and then close over $2.96 soon to open the way for targets above $3.00.

August natural gas stalled at $2.998 late last week. So far, August has pulled back to $2.697. The $2.998 swing high was in line with the 1.618 projection of the wave $1.99 – 2.494 – 2.157. From a technical standpoint, the move up was due for a correction. Momentum was exhausted and the bearish KasePO divergence indicates the correction that began Tuesday should now challenge major support levels.

Longer-term, the outlook for natural gas is positive. The move up looks to be forming five-waves. Wave III of the five-wave pattern was completed at $2.998. The corrective Wave IV is now underway. A normal correction should hold $2.61, the 38 percent retracement from $1.99 to $2.998. The $2.61 level was also strong support between June 10 and 17.

A close below $2.61 would open the way for a more significant correction. However, the longer-term bullish outlook would not be called into question unless there is a sustained close below $2.38. This is the 62 percent retracement of the move up from $1.99. Such a move is highly doubtful without a significant bearish shift in underlying fundamentals.

Wednesday’s hammer formation indicates the move down may halt to a grind lower. A test of Tuesday’s $2.84 midpoint will likely take place on Thursday. Key resistance is $2.88. This is the 62 percent retracement from $2.998 to $2.697. While $2.88 holds, odds will continue to favor a deeper correction.

August natural gas pushed to new highs Tuesday and early Wednesday before stalling at $2.974. Cooler than previously expected near-term temperature forecasts are reportedly the culprit for Wednesday’s pullback and settle at $2.863.

Longer-term, the outlook for natural gas is positive and is most likely forming a five-wave trend. The move up is due for a significant correction to form a potential Wave IV. Momentum is setup for bearish divergence. The Stochastic has also crept its way below the overbought threshold.

Charts show that August natural gas met a cluster of important wave projections at $2.974 Wednesday morning. The most significant was the 1.618 projection of the primary wave $1.99 – 2.494 – 2.157. It is rare for a primary wave such as this to extend beyond the 1.618 projection without a significant correction first.

The pullback from $2.974 forms a daily shooting star. This reversal pattern would be completed upon a close below Tuesday’s $2.82 midpoint and confirmed upon a close below the $2.751 open. This would then open the way for $2.66, the 38 percent retracement from $2.157 to $2.974.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

The U.K.’s vote for Brexit came as a shock to many investors and traders around the world. Equity markets have tumbled and crude oil followed suit as the U.S. dollar has risen substantially. Some pundits think the downturn in oil has been overdue, and warn that the market is still oversupplied and could slip further in coming weeks and months. Others hold the recovery will continue and that the decline is likely an overreaction to Brexit.

It is clear that sentiment is mixed. However, charts tell a clearer story. The long-term bias is positive, and ultimately odds still favor the move up. However, the downward correction is poised to continue for the near-term.

Negative Factors

August WTI met confluent support near $46.0 on Monday. This was in line the 0.618 projection of the wave $50.54 – 46.7 – 48.45 and 1.382 projection of the wave $48.45 – 46.92 – 47.96. Near-term odds favor a decline to at least $44.7, the 1.00 projections of the waves $52.28 – 46.4 – 50.54 and $50.54 – 46.7 – 48.45. This is a very important target and decision point for WTI. A close below $44.7 would open the way for targets in the low $40s. It is at those targets that the market will need to decide whether the move up will continue or a long-term bearish outlook would be adopted again.

Positive Factors

The upward correction that began late Monday afternoon may extend to $46.8 and even $47.5 in early trading Tuesday. However, $47.5 should hold. A close over $47.5 would call for a test of key resistance levels above $50.0, that if overcome, would indicate the downward correction is over.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary is a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Crude Oil Forecast: WTI Confirms Bearish Evening Star

Negative Factors

Positive Factors