Technical Analysis Archives - Page 52 of 56

May natural gas futures stalled at $2.475 after meeting the 0.618 target for the wave $2.949 – 2.583 – 2.719. A close over $2.576 will complete the bullish morning star and a close over $2.624 would confirm it. In addition, the confirmed bullish KaseCD divergence and second class long KEES permissions indicate the upward correction should extend. A normal correction will hold the 38 percent retracement from $2.949 at $2.66. An extended correction is expected to hold $2.77, the 62 percent retracement.

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Since mid-March prices for the May RBOB Gasoline futures contract have oscillated in a narrowing range and formed a coil pattern. Coils are patterns that indicate market indecisiveness, which has definitely been the case for the entire crude oil infrastructure since the beginning of the year. Coils are not as reliable as flags, pennants, and wedges at predicting the direction of the breakout, coils do tend to break in the direction of the trend, in this case down.

On Monday, the upper trend line of the coil was tested and held. Prices fell at the end of the day, and the evening star setup that formed indicates a test of support and the lower trend line of the coil should be tested later this week.

A close below 172.7, the 0.618 projection of the wave down from 197.95 would open the way for at least 161.7 and possibly 150.7 as he 1.00 and 1.382 projections, respectively.

A close over 185.0 would indicate prices have broken higher out of the coil and call for another test of crucial resistance at 197.3, which is the 0.618 projection of the wave up from 152.34.

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From day-to-day natural gas prices are oscillating back and forth on short term speculation and headlines. At one moment we read that the weather forecast is cooler than normal for the next few weeks and then a headline says the forecast is normal. In addition, rig counts are down, but the rate at which they are declining is leveling off. Storage levels are high, and government data shows that production is on pace to increase by five percent this year. The point is that it is hard to get a handle on the fundamental factors right now, and that is fairly typical for this time of year in the shoulder months between the break of the winter heating season and summer cooling demand. However, during this time the technical analysis factors can tell us a lot about how events may unfold, especially for the near term.

The natural gas forecast looks weak ahead of tomorrow’s U.S. Energy Information Administration (EIA) Natural Gas Weekly Update. Prices are falling again after last Thursday’s four percent gain ahead of the long weekend. Thursday’s move formed a daily bullish and engulfing line, weekly bullish piercing pattern, and confirmed a daily divergence on the KasePO. However, the inability to follow through this week, and the potential for a close below Thursday’s $2.657 midpoint today, does not bode well for an extended upward correction before new contract lows are made.

As it stands, the wave formation down from $2.949 calls for $2.49 once natural gas prices close below the $2.56 target. A close below $2.56 and decline to $2.49 and lower is the most likely scenario that will unfold, unless there is another bullish shock from this week’s EIA report.

Overall, most factors for the short term are negative. Momentum on the KasePO is declining, and a new swing low below $2.583 would negate the bullish divergence. The KaseCD is also declining, but is setup for a mini-divergence between the $2.633 and $2.613 swing lows, so caution is warranted. The KEES indicator is showing strong first class short permissions (magenta dots) on the 240-minute Kase Bar chart, and a short trade was triggered this morning when the red S formed.

A close below last Thursday’s $2.657 midpoint would certainly increase the odds of a decline to $2.56 tomorrow. However, a move back above this at the end of the day today would increase the uncertainty of a continued decline and could open the way for $2.72 to be challenged again. This is the key resistance level for the near term, and a move above this would call for an extended correction. This is a less likely scenario, but is not unlikely.

To conclude, the market knows what its support and resistance levels are and the near term direction will be decided by a close beyond these levels. A close below $2.56 will call for at least $2.49. Conversely, a move back above $2.657 would call for another test of major resistance at $2.72.

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Natural gas had been supported by late winter weather in regions of the U.S. through late last week. However, as expected, natural gas prices finally broke lower out of the large scale corrective pattern that formed during the calendar month of March. The move down is poised to continue, but in the very short term, there may be a small pullback first.

The May futures contract broke out of another small bearish flag this morning on the 240-minute equivalent Kase Bar chart and fell to a new contract low of $2.583. This is an important area of support, and a potential short term stalling point because May’s $2.583 low is in line with the 1.00 target for the move down from $2.949 (as shown in the chart above), and is also near the continuation chart’s swing lows of $2.567 and $2.578. In addition, a bullish KasePO divergence (green trend line) was confirmed this morning.

All of these factors are positive for the very short term. They indicate that a pullback may take place ahead of tomorrow’s U.S. Energy Information Administration (EIA) Natural Gas Weekly Update. However, the longer-term technical and fundamental factors indicate resistance should hold and that the move down will extend. Once natural gas prices have definitively broken support between $2.57 and $2.60, look for $2.51 and $2.46, the latter of which is also the 0.618 projection of the compound wave $2.949 – 2.608 – 2.686.

Look for resistance at $2.65 to hold. This is the 21 percent retracement of the decline from $2.949 and is near the lower trend line of the small bearish flag that broke lower this morning. Even a pullback to $2.72, which is the 38 percent retracement, would be considered a normal correction. A close over $2.72 is doubtful without a bullish surprise from external factors.

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Brent crude’s failure to close above the $57.5 completion point of the weekly morning star setup (circled in green) was negative and indicates the geopolitically driven move up that took place last week may be short lived. The Brent crude price rose modestly on Monday, but most short-term technical factors indicate it should test $53.1 again. A close below this would call for $49.2, which is the last target protecting the $48.95 contract low.

Look for resistance at $57.5 and $60.05. A close over the latter would open the way for the $63.66 swing high to be challenged.

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Natural gas prices are still oscillating in the upward sloping range that began March 3 when the $2.641 swing low was made. The lower trend line of the formation, which connects back to the $2.589 contract low, was tested, but held again on Monday. Most pundits indicate the long-term fundamentals are bearish, but this begs the questions, why hasn’t the market broken lower yet? This is one of many areas that technical analysis can help answer that question and give us a good idea of where the market will go once it breaks out of this range.

The chart below tells us everything we need to know about the outlook for natural gas in the near term, and can give us an idea about the longer-term outlook too. This is a very short-term analysis, so we will focus on those factors. Technical factors are showing that the market does agree with the bearish fundamentals, and that a break lower should take place soon, but that there are still enough positive factors like late winter weather in the Northeast to support prices for now.

The range that has formed over the past few weeks is an expanding wedge (shown in green), and a break out of this pattern will solidify direction for natural gas prices. The break out points for the pattern at $2.69 and $2.94 are in line with the 0.618 projections for the wave up from $2.589 (show in in red) and down from $3.045 (shown in blue). The confluence of these points tells us that a close below $2.69 would open the way for the 1.00 projection of $2.53, and a close over $2.94 would call for an extended correction to $3.10.

The expanding wedge and the Fibonacci wave projections give us a solid forecast once the market breaks out of the wedge. The wedge is a corrective pattern, and because the market entered the pattern after declining from $3.045, a break lower out of the wedge is favored. The negative bias is also confirmed by the KaseX’s most recent yellow and pink down triangles.

In summary, the near-term outlook is negative and a bearish U.S. Energy Information Administration (EIA) Natural Gas Weekly Update tomorrow would likely be the catalyst to achieve the expected break lower out of the expanding wedge. A close below $2.69 will confirm the break lower and call for at least $2.53. Conversely, a close over $2.94 would call for an extended correction to $3.10.

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WTI crude oil rose for a second straight day due to the declining dollar. The long-term bias is still negative, so the move up is corrective. However, mixed fundamental and technical factors indicate the correction should extend to at least $48.2 before settling into another trading range. This is the 1.00 projection for the wave up from $44.03 and the 38 percent retracement of the decline from $54.0. A close over $48.2 would call for $50.4, the 1.618 projection and the 62 percent retracement. Look for immediate support at the $45.33 and $44.77 swing lows.

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During the calendar month of March the April natural gas futures contract has traded in a range bound between $2.64 and $2.87. Most fundamental and technical factors are still negative for the long-term. The move up at this point is still corrective and will only delay the inevitable decline that is ultimately coming. However, late winter weather concerns continue to support the market and have rattled the nerves of traders enough over the past two days to push natural prices above $2.87 to challenge key resistance at $2.89 ahead of tomorrow’s U.S. Energy Information Administration (EIA) Natural Gas Weekly Update.

The market is hinting that a bullish EIA update may be expected, but if the number is disappointing, this natural gas price rise will collapse in upon itself and could be the catalyst the finally push prices lower to challenge key support targets.

The wave formations up from $2.589 (not shown), $2.641, $2.662, and $2.674 all show that $2.89 is a confluent wave projection. It is also the 62 percent retracement from $3.045 to $2.641. The confluence of wave projections and retracements at $2.89 make it the key decision point for an extended correction to at least $3.00 and possibly $3.07. At the time of this analysis, natural gas prices are trading right at $2.89, but they will need to settle above this to open the way for $3.00 in early trading tomorrow before the EIA update is released. Unless the EIA report is extremely bullish, it is doubtful that prices will settle above $3.07 in coming days.

Look for support at $2.78. This is in line with the $2.775 swing low, the midpoint of the recent range between $2.64 and $2.87, and the midpoint of the March 12 and 17 candlesticks. A close below $2.78 would indicate the move up has failed to extend once again.

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NY Harbor ULSD futures fell to a new intraday low for the eighth session in a row, but formed a bullish morning star setup and hammer. These are bullish reversal formations, but in this case it is more likely that a subsequent move up will be a correction rather than a reversal. In addition, the decline stalled near the 62 percent retracement of the move up from 154.8 to 197.86, which supports the likelihood of a correction. However, the KasePO and KaseCD show that the decline should ultimately continue. Look for resistance at 178.7 and no higher than 186.0 to hold.

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Natural gas prices are still oscillating in the corrective range between approximately $2.60 and $3.00. Early in the week it looked as though natural gas prices were ready to continue the decline. However, while there is little doubt that the long-term bias is negative, Wednesday’s price rise has called into questions how soon natural gas prices will fall to new contract lows.

Monday’s gap from $2.783 was filled early Wednesday and then April futures overcame the 0.618 projection at $2.80 for the wave up from $2.641. The $2.80 level was also near the 62 percent retracement of the decline from $2.87 to $2.662. The confluence of the wave projection and retracement at $2.80 makes it a crucial decision point for the near term outlook. Should natural gas prices close over $2.80, look for at least $2.89 because it is the 1.00 projection. This level is most important because it is also the 62 percent retracement from $3.045 to $2.641, the 0.618 projection for the wave up from $2.589 (not shown), and is in line with last weeks $2.87 swing high. A close over $2.89 would open the way for an extended correction and would further delay a decline to new contract lows.

The first class long permissions (blue dots) for the Kase Easy Entry System (KEES) indicate the move up will likely continue, and that $2.89 should at least be tested tomorrow. However, the bearish KCDpeak (red K above 2.848) indicates the move up is already overbought on the 120-minute equivalent Kase Bar chart. A move above $2.848 would negate the KCDpeak, and as long as the KEES permissions remain long (blue dots) the near-term bias will remain positive.

Look for support at $2.73. A close below this over the next few days would shift the near-term bias back to negative and call for the $2.641 swing low to be challenged.

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Midweek Natural Gas Forecast – April 15, 2015

Tag: Technical Analysis