Horrible Day in Natural Gas

The recent price path in natural gas shows that today's trading took values away from a key level that may be important in the near future.

In the spirit of simple (ONE TREND LINE), this market is under pressure until we take out $2.69. Why? Why $2.69?

Seasonality is bad for gas from Thanksgiving to the end of February. Utilities have stocked up and now they become sellers in gas of excess protection in Jan-February unless weather delivers. $2.69 is the MODE of the last 8 sessions. Every session we have traded that price. So it is the tipping point of ... CONTROL for next week will be the midpoint of the range of last week, which is essentially today's Big Momma range of $2.58-$2.80 ($2.69) which almost echoes the MODE of the last 8 sessions to the penny.

If the weather forecast changes and gets bullish, it will first test and likely fail at ~$2.69-$2.70. Until/unless we close above $2.69, this market is at risk for another down leg down (last leg was 63 cents from $3.00 to $2.37) from $2.80 to $2.17. That fills the gap on this daily continuation from the late September contract roll. There is some decent underpinnings of blocking (cold weather) which would be bullish but until we get other help, this is a challenge for this time of year. It is 11 cents. We will change the view in 11 cents, but there is the potential for another 40 cents downside if this plays out without bullish weather rescuing the market.

See also:

The most recent AEGIS webcast, where we describe how fundamentals are positive for 2021, despite recent price weakness.

Questions or comments, please contact us at research@aegis-hedging.com.