EIA's natural gas number expectations

Natural Gas

As temperatures begin to show signs of relief following one of the coldest winters to date, all eyes are on today’s Energy Administration Information's Natural Gas number (NYMEX:HPK14). Due to the large demand for natural gas over the past few months, reserves have been depleted at a much higher rate and the rate at which these reserves will be replenished can certainly have an impact on futures prices. Preliminary forecasts are for an injection of anywhere from 39-49 bcf, which comes after last week’s moderate build of 4 bcf. Natural gas has been trading relatively calm ahead of the number; however, that could all change come 9:30 am CT today.

From a technical standpoint, 4.500 has been a significant level which has supported weakness in price over the past few days and bullish traders will likely try to hold this level of support. In the event that price does fall below this level, look to the 4.428 area as the next significant support pivot on the chart. Given the recent strength in natural gas throughout the month of April, momentum appears to favor a bullish argument above the 4.500 pivot on the chart. Initial resistance can be seen at 4.570 followed by 4.650 and 4.703. Since price action has been relatively choppy as of late, traders should use previous peaks as initial targets and potential levels of resistance. The RSI has been holding at the 40-level, which could serve as confirmation of an underlying bullish tone, so traders will have to wait patiently to see if today’s number will be in agreement with the current sentiment of the market.

Natural Gas, 30-minute Bar Chart (e-Signal)


Lean Hogs

Lean hogs have experienced a tremendous amount of volatility over the past three months as the vicious P.E.D. virus has been killing piglets and raising major concern about the future supply of lean hogs. Prices rose limit-up seemingly every other day for some time and price moves in this market have been magnified as a result of the P.E.D. outbreak. However, concerns over supply appear to have dissipated and price has begun building negative structure following the 3/18 peak. It is tough to get a good “read” on this market; however, price has been respecting some important Fibonacci retracement levels with stunning accuracy. The recent low in hogs corresponded almost perfectly with the 50% retracement of a previous range in hogs and the level of support from which hogs spent the Wednesday-Friday of last week trading off happens to be a Fibonacci confluence zone. This technical area of importance is comprised of two different Fibonacci retracement levels, from two different price zones, overlapping around the same level on the chart. The previously mentioned Fibonacci confluence zone can be seen around 120.23000, where price found support and has since used this level as a “base” for its current rally.

Given all the outside “noise” affecting lean hog prices, it is difficult to determine a clear directional bias. Near-term momentum appears to have turned positive with prices making higher highs following the 4/9 low; however, the intermediate-term bias still appears to be lower as prices have made relatively lower lows and failed to surpass the high on 3/18. Recent action in the RSI has been contained between 80-40, which would serve as confirmation of the near-term positive momentum. Traders should continue to use key S/R level in the market to asses potential opportunities and keep an eye on momentum signals in the indicators.

Lean Hogs, 30-minute Bar Chart (e-Signal)


About the Author
Erik Tatje

Erik Tatje is currently a market strategist at RJO Futures and is the author of The Tatje Reporta daily technical correspondence. As a member of the Market Technicians Association, he has distinguished himself as a professional in the field of Technical Analysis and currently holds the Chartered Market Technician (CMT) designation. Erik can be reached atetatje@rjofutures.com or 312.373.5176. Learn more at www.rjofutures.com

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