Natural gas low-volatility buying risks downside correction

Daily Market Analysis for Tuesday, 05/28/2013

KEY TERMS

OVB      Outside Vertical Bar

VRCB   Volatility Reduced Compression Bar

ENERGIES

Brent Crude Oil (July ‘13):

  • Short Term Trend is bearish.
  • Confirmation of a top with a range violation on 05/22/13 @ 103.50. Confirmation of a top with a close violation on 05/22/13 @ 102.60. Downside Targets = 99.40
    • July Brent Crude was unable to meet the qualifications deemed necessary (daily close above $105) in last week’s report in order to breakout to the $110 mark and instead broke down following Monday’s initial push higher to generate a bearish weekly OVB.
    • Friday’s low volatility short-covering  move should only last briefly into next week before dropping lower to challenge the monthly lows @ 99.08 en route to a possibly more damaging move near the annual lows.
  • Projected Daily Range: 1.52
  • Projected Weekly Range: 4.36
  • Projected Monthly Range: 9.59

WTI Crude Oil (July ‘13):

  • Short Term Trend is bearish.
  • Confirmation of a top with a range violation on 05/22/13 @ 95.46. Confirmation of a top with a close violation on 05/22/13 @ 94.28. Downside Targets = 91.10.
    • July WTI Crude Oil made new seven-week highs during this past week’s trading activity before falling lower in the second half of the week, generating a bearish weekly OVB signal.
    • Given Thursday and Friday’s resurgence in the latter half of the trading day, expect for an initial push higher in the early stages of the coming week before meeting heavy resistance near $95 and possibly falling back below $90 by the end of the trading week.
  • Projected Daily Range: 1.79
  • Projected Weekly Range: 4.42
  • Projected Monthly Range: 8.93

Natural Gas (July ‘13):

  • Short Term Trend is bearish.
  • Confirmation of a bottom with a range violation on 05/14/13 @ 4.021. Confirmation of a bottom with a close violation on 05/14/13 @ 4.024. Upside Targets = 4.195 – 4.243
    • July Natural Gas moved almost vertically higher throughout this past week following a gap higher opening that was never filled before generating bullish divergent price action on Friday pointing Monday’s trading action to the downside.
    • After retracing more than 65% of the recent correction, natural gas is getting overbought on low volatility in the short-term that could trigger new selling for a retest of at least the $4 threshold and more likely a move below $3.70.
  • Projected Daily Range: .113
  • Projected Weekly Range: .205
  • Projected Monthly Range: .570
About the Author
Kris Hicks

KMH is a trading and technical analysis firm that specializes in commodity futures and commodity based ETF’s. Kris Hicks has worked for numerous years in the commodity business and in 2011 accurately forecasted both $25 moves to the downside in May and July and the $25+ move to the upside in October in oil. He also called the all-time high day for gold on Sept. 6, 2011 and forecasted a projected downside target of 1528.10 in March 2012. He was also responsible for projecting the Q2 and Q4 low in the Euro FX to within 13 and 9 ticks, respectively. His trading methodology has a high degree of accuracy which confirms tops/bottoms, projected trading ranges and projected targets for those ranges. His expertise is focused on 16 commodities plus the comparable ETF markets. You can reach Kris at Kris@KMH-Capital.com or visit his website at www.KMH-Capital.com.

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