A second day of short-covering lifted the May 15 natural gas contract above another area of resistance on Thursday at the 2.625-2.640 level.
This resistance held in early morning trade with the market
selling off following release of the weekly storage report. The selloff
dropped the May contract back toward former resistance, now support, between
2.550-2.560 which held.
As support held, the market reversed back higher into the
close breaking out above 2.620-2.645 to close the day at 2.684, up .074 (2.8%).
One of the hallmarks of a short-covering rally is for a
sharp upward reversal followed by an equally large sell off back lower.
If the latest strength in the market is in fact a short-covering rally, the
market will need to quickly sell back off over the next few sessions.
Yesterday’s rally stalled under 2.700-2.720 which remains
the first area of resistance today followed by the 40 day moving average at
2.740.
Former resistance between 2.620-2.645 now becomes the first
area of support followed by 2.550-2.560. A close under 2.550 will turn
the near term trend back down with following support at the 2.475 contract and
2015 spot contract low set on Monday.
Technical Indicators: Moving Average Alignment –
Neutral-Bearish
Long Term Trend Following Index – BearishShort Term Trend Following Index – Bullish (turned higher yesterday)
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