Quiet Before Storm, May Prepares for Expiration Week
A chart gap, created when the one day's high price is lower than
the low price of a consecutive trading day is an eye sore to chart
watchers-they don't like them and they will almost always try to
fill them in by trading the market back between the "gap." So it
came as no surprise when the first order of Friday's trading was
for the market to check lower in an attempt to fill in the 2-cent
gap left between Wednesday's high of $2.18 and Thursday's low of
$2.20. It never made it. In fact, sellers could barely dent it and
managed only a $2.195 low, before late buying lifted the prompt
month to just above unchanged Friday afternoon. May finished the
week at $2.226, a 0.1-cent gain for the day.
Aside from gap, trading was basically featureless Friday as
light long liquidation met nearly evenly with continued speculative
buying. Many traders, however, elected to sit on the sidelines
ahead of the bi-weekly Commitments of Traders report released
Friday by the Commodity Futures Trading Commission. For many the
report did not disappoint, confirming their suspicions that the
non-commercial segment of the market has increased their net long
positions. Primarily comprised of speculative funds groups and
locals, non-commercials held 33,582 net long positions as of
Tuesday, April 20.
But despite that staggering long position, which will have to be
sold off at some point, Tim Evans of New York-based Pegasus
Econometric Group thinks prices still have some upside potential.
"There is a distinct possibility that we will see some long
liquidation ahead of the May expiration Wednesday. However, that
will just free up buying potential for the June contract," he said.
Based on that, he suggests a strategy of selling the first half of
the week and buying during the back half. "From there, June
prices should coast higher. But ultimately the market will run out
of buying support, which will put the market at risk of a much
However, Susannah Hardesty of Energy Research & Trading in
Greencastle IN, citing a combination of low storage injections and
concerns regarding deliverability, remains firmly in the bullish
camp. Hardesty, noting that prices are moving according to her
projections, looks for continued strength into the May expiration
Wednesday. "Although the expected resistance for the May futures
contract is at $2.25, I would not be surprised to see prices higher
than that into expiration, to $2.35-40." she wrote in her Natural
Gas Weekly Report dated April 22, 1999.
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