By Dean Rogers, GM & Senior Analyst, Kase and Company, Inc.
July natural gas rose to a new high for 2016 when it overcame the January 8 swing high of $2.635. The move up extended to crucial resistance near $2.75 and stalled. $2.75 is a confluent target. Most importantly, it is the 1.382 projection of the primary wave $1.949 – 2.427 – 2.08.
July’s decline on Wednesday is reportedly due to revised weather forecasts that call for cooler than previously expected temperatures over the next two weeks. In addition, some traders are allegedly concerned that factors behind the rapid price increase in recent weeks have been overhyped.
Momentum is setup for a bearish divergence on the KasePO and the Stochastic is in extreme overbought territory. There is also an evening star, which is a bearish candlestick reversal pattern. These factors indicate the correction that began late Wednesday afternoon should extend over the next few days.
Look for $2.64 to be tested tomorrow (or even Wednesday afternoon). This is currently the 21 percent retracement from $2.101 to $2.786. This was strong resistance and will likely be resilient support. A close below $2.64 would open the way for $2.52, the 38 percent retracement from $2.101. A normal correction should hold $2.52. However, after such a strong move up, the correction might be larger than normal.
The longer-term outlook for natural gas is positive. This downward correction will most likely form a complex Wave IV of a longer-term five-wave trend. However, should prices turn higher again tomorrow, look for resistance at $2.72 followed by $2.80 and most importantly $2.87. The latter is the 1.618 projection of the wave up from $1.949. A significant correction will almost certainly take place before $2.87 is overcome should the current correction stall before reaching at least $2.52.
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About The Author
Dean Rogers is the General Manager and Senior Analyst at the Kase Call Center. Dean began his career with Kase and Company, Inc. in early 2000 as a part-time programmer. Early in his career with Kase, Dean wrote programs and modules to help expedite and automate parts of Kase’s internal forecasting and hedging systems. He also worked extensively with the Kase StatWare® trading indicators. With this work, he quickly became passionate about the markets, and in particular, technical analysis. Dean’s new found market enthusiasm, along with his strong work ethic and dedication to Kase and its clients, resulted in him becoming Ms. Cynthia A. Kase’s protégé and ultimately her “right hand man”.
Dean oversees all of Kase’s day-to-day operations and writes Kase’s award winning weekly and quarterly crude oil and natural gas forecasts. He also teaches at Kase’s technical analysis and energy risk management courses, manages all programming and development, and collaborates closely with Ms. Kase in developing new software and carrying out quantitative analytics research.
Dean is a member of the Market Technicians Association, has been quoted in numerous publications including the Wall Street Journal®, Bloomberg® and Reuters® publications, and Black & Veatch’s® Cap Markets Report. He has also been published in Technical Analysis of Stocks and Commodities® magazine and contributed articles to various eSignal™ and Bloomberg® publications.