Tuesday, October 13, 2009

Natural Gas Hangs Tough

Natural Gas has spent the last week trading sideways in a range between 5.12 and 4.75, and this morning it's right at the midpoint.. It has been supported so far at the 50% retrace point of the last leg up for the Nov contract. That leg is labeled "a" in the below chart.


The descending highs over the last week suggest that there is some consistent selling going on around the 5.00 level, while the lengthy sideways move near the highs also suggests decent buying interest. That leg is labeled "b" and is clearly NOT an impulse wave down, whether the 4.75 lows hold or not.

Getting back above the 5.00 level would indicate new highs are likely.
AND if the "c"="a" it targets 5.57 from 4.75.
That target is ALSO c = 1.382 of a ( of a greater degree on the spot chart) AND the long term .236 retrace of 15.78 to 2.40.
That represents a significant cluster of resistance. Given the near record inventories, and the seasonal tendency for an intermediate term pullback from Oct on, the downside risk following the next leg up will be HIGH.

Additionally there is the potential for the pullback to last several months into the seasonal early winter low. If for instance that were to be a not uncommon 50% pullback on the spot chart to roughly 4.00, that would represent some real pain for holders of the Feb. contract.

No comments:

Post a Comment