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.

This is an important time for natural gas because the market is moving out of the spring shoulder months and into summer. The market had been poised to test the contract lows, which it did, but the lows held and prices reversed higher this week.

The July natural gas futures contract closed above $2.78 resistance on Tuesday and was driven by warmer temperatures in much of the eastern half of the U.S. To sustain the move warm weather will need to persist and key resistance at $2.92 must be overcome on a sustained closing basis. The market tested $2.92 in early trading Wednesday, but this level has held on a closing basis so far.

The $2.92 target is the gateway for a sustained summer rally because it is currently the most confluent target on the chart and makes connections to targets near, and well above, July’s $3.15 swing high. It the 62 percent retracement from $3.15 and the 0.168 projection for the move up from $2.54. A close over $2.92 will call for July’s $3.15 swing high to be challenged because the 1.00 projection for the wave up from $2.54 is $3.166.

The $2.92 level will probably be overcome in early trading tomorrow on an intraday basis, but again, the key will be a sustained close over $2.92. In fact, if there is another bearish EIA storage report tomorrow, the move up could stall.

First support is near yesterday’s $2.77 candlestick midpoint and the 38 percent retracement of the move up from $2.556. If the outlook is going to remain positive for at least the next few weeks then $2.77 should hold. Key support is $2.70, the 62 percent retracement. A close below this would put the market back into a cycle of testing the contract lows again.

This is a brief analysis ahead of tomorrow’s EIA report. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested, please sign up for a complimentary four week trial.

As expected, OPEC is not changing their output, or their strategy of retaining market share, because their strategy is working. Greece may default, pull-out of the European Union, strike some new deal, or do nothing, all of which could send waves through the Eurozone. The dollar is up and then down from day to day. The list could go on and on and on, but the point is that all of these are conflicting factors, most of which have already been priced into the market, and none of which give any clarification of a long-term crude oil price direction.

Prices on a chart are the reflection of what information traders have and the information that they are acting upon. When prices go up, a majority of traders, at that moment, have a reason to buy. If the information, or a series of events, are strong enough to sustain a move a trend develops. However, when prices chop around, like they have for the past few weeks, it is a result of a lack of information, or an abundance of too much inconsequential information. Right now, the market suffers from the latter. The market lacks definition and clarity, and because of this we expect more mind numbing choppiness and range bound trading until the market can get its teeth into factors that can sustain a directional move for the longer-term.

Last week, Brent failed to break the upper trendline of the downward sloping channel that it has been trading in since May 6th. From a technical standpoint, Brent looks more negative than WTI, though its move down today was marginal. Nonetheless, Brent met confluent support around $61.0 last week, and upon a close below that level we expect to see $59.9 and then $58.5.

The retracement to $63.43 has held the 50 percent retracement so far, but a close over this would push prices to $64.7 and then to retest the $65.88 swing high.

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 WTI and Brent crude oil price forecast. If you are interested, please sign up for a complimentary four week trial.

The price of natural gas, or any commodity for that matter, is theoretically the fair price at a given time. Traders will buy gas when they think prices are going to rise, and sell it when they think it will fall. This may be oversimplifying the process a bit (okay, a lot), but the point is that rising and falling prices are reflected on charts.

Charts tell us what traders and other market participants think about the market and the actions that they are taking (buying or selling). Interpreting price action on charts is the forte of technical analysis. Therefore, technical analysis is good at telling us what the market knows about itself, especially for the near-term.

For the long-term, technical analysis can be used as a guide, but people change their minds, and therefore, so does the market. When these changes of heart and mind take place, so does the direction of the market and the reflection of price action on the charts. As a result these changes are reflected in the underlying technical factors too.

Here is what we are currently seeing on the daily chart and the $0.035 Kase Bar chart:

Tuesday’s close above Friday’s midpoint was positive but the $2.716 open held.
The move up was corrective and about the same size ($0.125) as prior corrections from $2.902 ($0.136) and $2.788 ($0.099).
The KaseCD and KasePO momentum indicators are declining.
The underlying KEES permissions (color-coded dots) are transitioning back to being short.

Therefore, for the near-term, the natural gas charts are tell us that prices will continue to decline to at least $2.54. This is a confluent support target and is the July contract’s low. It is too soon to say that prices will stall here. In fact, other than a correction once $2.54 is met, most technical factors call for prices to continue to decline to major targets we discuss at great length in our weekly Natural Gas Commentary.

Resistance at $2.79 is the 38 percent retracement of the decline and expected to hold. This threshold will be lowered to $2.76 once $2.54 is met.

WTI crude oil prices have been oscillating in a downward sloping channel for the past few weeks and the decline has formed a bullish continuation pattern. Although the formation is not a perfect flag, pennant, wedge, or triangle, it does appear to be corrective. More often than not corrective patterns like this ultimately break higher and the original up trend extends.

Crucial support at $57.0 held on a closing basis last week and Friday’s move up and the attempt to close over the upper trend line of the formation on Monday indicates prices should rise to at least $61.6 over the next few days.

Monday’s hanging man is negative, but so far Friday’s $59.13 midpoint has held. This is also the 38 percent retracement of the move up. A close below this would complete the hanging man and call for another oscillation lower to test support and possibly the lower trend line of the corrective formation.

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 WTI and Bret crude oil price forecast. If you are interested, please sign up for a complimentary four week trial.

Natural gas’ pullback still appears to be corrective, but has positioned itself to test a crucial decision point at $2.71. This is in-line with the $2.711 swing low, the 1.618 projection of the wave down from $3.105, and the 61.8 percent retracement of the move up from $2.443.

The $2.71 objective should be challenged ahead of tomorrow’s EIA report, which is confirmed by KaseX’s short signals on the $0.035 KaseBar chart today. The confluence, positioning, and importance of $2.71 leads us to believe that it will hold, at least initially, and will be followed by a trading range similar to the one seen throughout March.

This is a brief analysis ahead of tomorrow’s EIA report. Our weekly Natural Gas Commentary is a much more detailed and thorough natural gas forecast. If you are interested, please sign up for a complimentary four week trial.

Gasoline futures formed a double top at approximately 209.5 after attempting to overcome this crucial area of resistance in early trading Tuesday. The double top and confirmed dark cloud cover call for at least 195.0. This is a crucial decision point for an extended correction because 195.0 is in line with the 196.21 swing low and 38 percent retracement from 169.25. A close below 195.0 will confirm the double top and open the way for its target near 183.7, which is also near the 62 percent retracement.

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For the past few weeks many traders have doubted the rationality of natural gas’ price surge and have been looking for a stalling point. It is hard to argue with the charts though, and our analysis, based purely on what is happening on the charts, has called for $3.05 as a potential stalling point. We have stated in our weekly Natural Gas Commentary that a correction from $3.05 would likely take place as long as it held on a closing basis. The $3.05 target was overcome by the $3.105 swing high, but Tuesday’s blow-off high and key-point reversal on the daily chart, KasePO and KaseCD divergences on the $0.035 Kase Bar chart shown below, and failure to close over $3.05 indicate the move up has stalled and the anticipated downward correction is now underway.

Today’s close below $2.92, the 0.618 projection of the wave down from $3.105, opens the way for $2.85. We are looking for the correction to extend to at least $2.85 and possibly $2.73 over the next week or so. Tomorrow’s EIA number will not likely influence the downward correction unless it is extremely bullish and out of line with expectations.

Ultimately, we see that support between $2.85 and $2.73 will hold and a trading range similar to the one experienced from mid-February until late March between approximately $2.73 and $3.05 will ensue while the market awaits directional confirmation from summer weather and/or other related factors.

For a more detailed analysis and in-depth natural gas forecast take a trial of the Kase Commentary on Natural Gas today!

The WTI-Brent spread has been fluctuating in a range for the past few weeks after narrowing to an intraday high of (3.34) on April 15. The narrowing spread has supported rising WTI and Brent price, and the wave formations indicate the spread will most likely continue to narrow. However, it must overcome (5.50) to make the connection to a (4.30) decision point. A close over (4.30) would open the way for a confluent (2.30) target, which connects to (1.30). That said, a close below (8.40) would call for the spread to wide again to at least (10.3).

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Many traders and analysts have been skeptical of natural gas’ recent price surge. However, technical analysis is good at telling us what the market thinks about itself, and it is hard to argue with the bullish technical factors that have formed over the past few weeks.

The June natural gas futures contract is testing a crucial decision point at $2.93. This is an important confluence point for many technical factors and is most importantly the 0.618 projection for the waves up from $2.481 and $2.711. The near-term fate of natural gas prices will be determined by a close above or below $2.93.

A close over $2.93 would indicate market participants are expecting a bullish EIA report tomorrow and for prices to push for at least $3.05. There is a momentum divergence setup on the KasePO, which indicates the move up is becoming exhausted. However, based on many other positive technical factors, we expect to see a close over $2.93 and rise to at least $3.05, which is the next lynchpin for a bullish summer recovery.

A close below $2.93 would signal continued hesitance and doubt that this move up will be able to overcome $3.00. Look for support at $2.78 and $2.66. Even upon a significant correction we expect $2.66 to hold.

Request a trial of our Natural Gas Commentary to receive a more in-depth analysis every week.

For the past few weeks WTI crude oil prices have risen significantly, and for the first time since early December 2014 prices closed above $60.0 last week. However, many traders are questioning the long-term validity of the price rise continuing due to concerns of a persistent supply glut, and the technical factors show that the market reached a crucial decision point at $62.58 last week.

The June WTI futures contract met crucial resistance at $62.58 on Wednesday, May 6, and as called for in our weekly Kase Crude Oil Commentary, prices have begun to pullback in a corrective manner. The correction is taking place after a blow-off high and evening star setup formed that same day. The evening star (some might say shooting star) was both completed and confirmed on Thursday when prices closed below the midpoint and open of Tuesday’s Harami bar. In addition, bearish divergences on the KaseCD and KasePO were confirmed on Friday. The combination of negative short term technical factors indicates the downward correction should extend and will likely form Wave IV of a longer-term five wave formation that projects to target in the mid-to upper $60s and even the low $70s.

We expect the pullback to challenge at least $56.2. This is the 38 percent retracement of the move up from $45.93 and is near the bottom of the sub-wave 4 of III. If prices are going to extend to new highs in the next week or so, $56.2 must hold. Otherwise, a close below $56.2 would call for the 50 and 62 percent retracements at $54.3 and $52.3. For now, it looks as though $56.2 will hold. The long-term outlook would only shift back to being bearish upon a close below $52.3. We do not expect to see a decline of that magnitude.

Today’s decline was nominal, so the next few days will be crucial for the near-term direction. A close over last Thursday’s $59.82 midpoint would shift the near-term outlook back to positive, call for another test of $62.5, and likely open the way for the five-wave pattern to unfold to upper targets of $66.8 and $71.5 over the course of the next few months.

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Midweek Natural Gas Forecast – June 10, 2015