NG Weekly: Balance Early Week At Key Support, Selling Interest There And Price Discovery Lower To 2.73s

Summary

• Balance trade, 2.89s-2.97s, through mid-week at/near last week’s key support.
• Selling interest in Thursday’s auction, 2.83s-2.80s, sell-side breakdown and price discovery lower to 2.73s.
• This week’s auction saw balance development early week at key support before selling interest drove price lower to 2.73s as sell-side continuation developed near major structural support.

In this article, we examine the significant weekly order flow and market structure developments driving NG price action.

As noted in last week’s NG Weekly, our primary inference for this week’s auction was for sell-side activity and re-test of key structural support, 2.87s. This probability path played out as two-sided trade developed through mid-week near key structural support, 2.87s. Selling interest emerged in Thursday’s auction, 2.83s-2.80s, driving price lower in a sell-side breakdown, achieving the unsecured stopping point low, 2.73s, in Friday’s auction, closing at 2.74s.

27 January-01 February 2019:

This week’s auction saw narrow, two-sided trade in Monday’s trade before a sell-side probe of last week’s key support developed in Tuesday’s auction to 2.79s. Buying excess rejected the low, driving price modestly higher back into last week’s lower balance area. Narrow, two-sided trade continued, 2.92s-2.84s, until midway in Thursday’s auction. Rotation toward key support developed through the EIA release (-173 bcf vs. -189 bcf expected) before initiative selling interest emerged, 2.83s-2.80s, driving price lower in a sell-side breakdown attempt into early Friday’s auction.

Sell-side continuation developed in Friday’s auction as key structural support, 2.87s, failed. The market achieved an unsecured stopping point low, 2.73s, ahead of Friday’s close, settling at 2.74s.

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This week’s primary expectation of price discovery lower developed, albeit late in the week as key structural support, 2.87s, failed. Friday’s low, 2.73s, is an unsecured low, implying at minimum a need for repair and thus price discovery lower. This structural development occurs within the context of a sell-side breakdown attempt at key structural support, 2.87s.

Looking ahead, the near-term bias (2-4 week) remains a sell-side bias, based on market structure and order flow. Focus into next week now shifts to market response at prior key support/sell-side breakdown area, 2.87s, for order flow confirmation/negation of the sell-side activity. Failure of the buy-side in this area opens the door to further price discovery lower into major key demand, 2.20s-1.50s.

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Following the partial US government shutdown, the CFTC has resumed publishing the weekly COT report. The publishing resumes with late December’s data and will be lagging for the next two to three weeks (releases on Tuesdays and Fridays until current) as they catch up. Our data will update with their publishing schedule.

The market structure, order flow, and leveraged capital posture provide the empirical evidence needed to observe where asymmetric opportunity resides.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.