Natural Gas Forecast: Prices Retreat into Familiar Territory

By Dean Rogers

Natural gas fell back into the trading range between $2.23 and $2.39 where it spent the first week of the new year. This comes after the failure to extend to the 0.618 projection of the wave $1.802 – 2.386 – 2.188. There is still an outside chance the move up will extend to $2.56 while $2.188 holds, but overall, the charts do not look good and odds favor a decline to test major support.

The move down from $2.495 broke down into five waves that terminated near $2.241. Today’s small move up to $2.323 was the type of three-wave correction that would be expected after a five-wave pattern. This keeps short-term odds in favor of the decline below key support at $2.23. Upon a close below $2.23 look for $2.17, the 0.618 projection of the wave $2.495 – 2.241 – 2.323. This then connects to $2.07 as the 1.00 projection. These are also the 50 and 62 percent retracements of the move up from $1.802 to $2.495, respectively.

NGG6 20160113

Today’s Harami line and star setup is positive, but the star’s blow-off high dampens the likelihood of a turn higher tomorrow. A surprise bullish withdrawal reported by the EIA tomorrow morning could push prices higher, but based upon the price action for the past few days it looks as though most market participants expect the decline to continue.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

By Dean Rogers

China’s stock market plunge wreaked havoc on stock and commodity prices around the world last week. Fears of a further slowing economy in the world’s largest energy consumer along with weak manufacturing demand and the deepening global supply glut have recast a negative outlook on oil prices. The negative sentiment has been reflected in the technicals too as prices continue to fall.

February WTI fell to $30.88 on Monday and came close to meeting a crucial confluence point at $30.6. This is near the 0.618 projection of the wave $38.39 – 32.1 – 34.34, and is the last support protecting against a decline into the $20s. A close below $30.6 would call for at least $29.0 and likely $28.1. The latter is the 1.00 projection for the wave down from $38.39.

CLG6 20160111

The KasePO PeakOut (green P) indicates Monday’s $32.2 midpoint might be tested early Tuesday, but we expect this level to hold. Other than the intraday PeakOut there is little to no technical evidence that the decline is going to stall. Therefore, without some type of unexpected shift in the underlying fundamentals and/or technicals we expect to see prices fall into the $20s soon.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary is a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

By Dean Rogers

There is little doubt that the lack of demand for natural gas as a heating fuel this winter is taking its toll on prices. The market still looks and feels desperate to push higher, but fundamental and technical factors are working against this scenario. There is an outside chance prices could rally by another 10 to 15 cents on a close over $2.39, but we do not expect the move up to last much longer without a significant boost from external factors. In other words, it is going to have to get really cold, really soon, in key areas of the U.S., and last for several consecutive weeks for the move up to continue to any significant degree.

The move up from fresh 16 year lows stalled at $2.39 on December 29 and has subsequently oscillated in a narrowing range. A coil, or possibly an ascending triangle, has formed, and prices briefly broke lower out of the formation before Wednesday’s settlement. The formation indicates a breakout should take place very soon as the pattern nears its apex. The key levels to watch are $2.26 and $2.39.

NGG6 20160106

Odds favor a break lower due to KaseX’s bearish turn signal (purple arrow) on the 3.5-cent Kase Bar chart. A close below $2.26 would call for $2.17 and $2.09.

As stated, there is a modest chance that prices could rally 10-15 cents on a close over $2.39. However, even if this is the case, we do not expect prices to overcome $2.55 given current circumstances.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

By Dean Rogers

Evolving weather models that had previously predicted a cold spell in the Northeast U.S. and in the Great Lakes region are reportedly now forecasting above normal temperatures in early January. This could dampen the likelihood of a further price rally for natural gas in coming weeks, and the charts tend to agree.

Today’s decline was quite negative for the near-term outlook, and $2.16 is an important target that should be tested in coming days. This is near the 0.618 projection of the wave down from $2.386 and the 38 percent retracement of the move up from $1.80. A close below $2.16 would call for $2.09 and $2.03.

NG G6 - eSignal

That said, this is a tough call right now because the market still seems desperate to rally after recently falling to 16 year lows. Wednesday’s decline could be a correction of the move up as prices attempt to extend toward a highly confluent $2.51 level. The late rally in trading after hours on Wednesday indicates $2.31 and even $2.37 might be tested in early trading ahead of Thursday’s EIA Natural Gas Storage report. We expect $2.37 will hold.

It is a bit early to call for a trading range, but we get the sense that is the most likely scenario for natural gas in coming weeks. The boundaries of the range could be quite wide, between approximately $2.03 and $2.37. Trading over the next few days should give us a better sense of what is in store for natural gas prices in early 2016.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

Walt Disney Co. (DIS)

By Dean Rogers

“Well, the Force is what gives a Jedi his power. It’s an energy field created by all living things. It surrounds us and penetrates us; it binds the galaxy together.” You may think that I am referring to the legendary words spoken by Obi-Wan Kenobi to Luke Skywalker while teaching him the ways of the Jedi in “Star Wars” (later retitled “Star Wars Episode IV: A New Hope”). However, I refer to that quote because Walt Disney Co. has made the essence of Obi-Wan Kenobi’s statement about the Force the mantra of their capitalization on the Star Wars brand after acquiring Lucasfilm in 2012 for $4.06 billion.

For the past several months, and likely for the next several years, everywhere you look Star Wars branded items from toys, to clothing, to cars, and even makeup, surround us, penetrate us, and binds Disney’s marketing efforts together. I call it the “Essence of the Force Strategy”.

So far, Walt Disney Co.’s strategy has worked, and it has worked well. “Star Wars Episode VII: The Force Awakens” has already shattered world-wide box office records and has brought in over $1 billion since its opening in the U.S., and some think that it will bring in $1-2 billion more after its opening in China on January 9. Those figures will not even scratch the surface of what is to come from the Star Wars brand for Walt Disney Co. in merchandise sales, Episodes VIII and IX, and the expansion movies like “Star Wars: Rogue One” slated for release in December 2016. The key question is, will Star Wars be enough of a boon to support DIS and turn the stock price higher in coming weeks, months, and even years?

There is a lot more to Walt Disney Co. than Star Wars. They have made brilliant moves in recent years with their acquisition of Lucasfilm, Marvel Studios, Pixar, and The Muppets to name a few. However, there are other areas of Walt Disney Co., such as the rising sports right costs of ESPN, that weigh heavy in the minds of some Wall Street pundits. Enough so, that some are doubting the prospects of a long-term move higher for DIS shares.

DIS’s December decline, from a technical standpoint, is most likely a correction of the longer-term move up, and the breaking point is $101.3. Our price forecasting model, based on various components of technical analysis, shows that the long-term outlook for DIS is positive, but that the downward correction could extend in coming weeks before DIS overcomes key resistance at $114.5.

The following table shows the near-term targets and support levels along with probabilities of meeting those targets and levels within the next 10 trading days. This is a short-term forecast, but the implications of targets and levels discussed could have a long-term impact on the share price of DIS.

DIS-Table

On Monday, December 28, KaseX confirmed a bullish turn signal (green arrow) and a first buy signal (yellow triangle). The combination of these two signals is called a pierced dart, and is usually a strong buy. The pierced dart puts short term odds in favor of a move to at least $108.5. This then connects to $110.5 and $114.5. A close over $114.5, which is near the 62 percent retracement of the decline from $120.65 to $104.3 and the $114.75 swing high, would indicate the long-term bullish move is going to continue.

20151229 DIS

However, the wave formations down from $120.65 and $114.75 indicate a deeper test of support might take place first. This hinges on a close below $105.6, which is near the 62 percent retracement of the move up from $104.3. A close below $105.6 would shift near-term odds in favor of a deeper test of support with $103.8 and $101.3 as the next thresholds.

The reason that $101.3 is the breaking point for DIS is that it is the 62 percent retracement of the move up from $90.0 to $120.65, the 1.00 projection for the wave $120.65 – 107.62 – 114.75, and the 0.618 projection for the wave $122.08 – 90.0 – 120.65. A close below $101.3 would not only call for the decline to extend to $96.4 and $93.7, the 1.382 and 1.618 projections of the wave down from $120.65, but possibly $88.6, the 1.00 projection of the wave down from $122.08.

The confluence at $101.3 indicates that DIS shares will be hard pressed to close below this level. We do not expect $101.3 to be broken, and as long as this level holds, it means Walt Disney Co.’s “Essence of the Force Strategy” is working and there may be a good buying opportunity on a move back up from $101.3 if prices slide this low.

This is a brief technical analysis of DIS based upon Kase’s technical forecasting models and trading indicator KaseX. If you are interested in taking a trial of KaseX please contact sales@kaseco.com. We would love to get your thoughts about the forecasted targets and probabilities. Leave a comment or send them along with your request for a trial to sales@kaseco.com.

By Dean Rogers

Natural gas is finally showing some signs of life as 2015 comes to a close. Reports that colder than normal temperatures along the East Coast and in the Great Lakes region for the first week of January have sparked a much needed relief rally from recent 16-year lows.

February natural gas, which will become the prompt futures contract on January 30, rallied to $2.061 on Wednesday and settled at $2.036. This was above the December 14 gap down from $2.022. Confluent technical resistance was met at $2.061, a crucial wave projection that connects to $2.13, $2.22, and $2.27. The wave $1.802 – 2.011 – 1.933 that met its 0.618 projection at $2.061, the close over the $2.022 gap, the break higher out of an intraday bullish descending triangle, and KaseX’s pierced dart signal (green arrow, bullish divergence, and yellow triangle, first buy signal) indicate the move up should extend to at least $2.08 and very likely $2.13 over the next few trading days.

NGG6 20151223

There is little doubt that the move up is corrective of the longer-term decline, and it is too soon to definitively state that a long-term bottom has been made. Tomorrow’s EIA Weekly Natural Gas Storage Report could make or break the rally in the short-run. Lighter trade volume around the holidays is also a concern that could lead to the rally being short-lived. However, if temperatures do turn colder than normal in key areas of the U.S. as anticipated in coming weeks, bullish sentiment alone could support prices above $1.90 for the interim.

Wednesday’s $2.00 midpoint is first support, and will likely be tested on Thursday. If the move up is going to continue it should hold $1.96 and has to hold $1.90. The $1.96 threshold is near Wednesday’s open and the 38 percent retracement of the move up from $1.802 to $2.061. A move below $1.96 would not only call for the $1.933 swing lows to be taken out, but more importantly for a test of the 62 percent retracement at $1.90. A close below $1.90 would indicate the rally is over and that another test of recent lows is right around the corner.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four-week trial.

Apple Inc. (AAPL)

Apple’s stock has taken a bit of a beating this year, and the holiday season has not been the boon loyal shareholders had hoped for. Most technical factors are negative and odds favor a continued decline. However, there are a few positive technical factors that indicate the upward correction that began on November 21 could extend first.

Overall, the outlook is for AAPL is negative and our technical price forecasting model indicates that over the next ten days there is a 70 percent chance for $106.4 and a 60 percent chance for $103.8.

AAPL - Table

The decline from $123.82 is forming a five-wave trending pattern, and $102.5 is the key support target for the formation. Wave III is currently in progress and $102.5 is a potential stalling point and beginning of Wave IV. Should prices settle below $102.5 look for Wave IV to form from $98.8.

There is some technical evidence that indicates AAPL could rise to $108.9 and even $111.0 before the first target at $106.4 is met. The decline stalled at $105.57 on Monday, formed a pseudo hammer, and has been flirting with Friday’s $107.5 midpoint. In addition, KaseX, shown in the chart below, confirmed a weak bullish turn threat (gray arrow). The signal indicates stops on the daily chart could be tightened to approximately $112.3, which is in line with our $112.6 resistance threshold.

AAPL

If the upward correction is going to extend in a significant manner it will need to close over at least $108.9 and very likely $111.0. The latter is strong near-term resistance that we expect to hold. A close over $111.0 would open the way for and extended upward correction to $112.6 and even $114.4.

Under Armour Inc (UA)

Since September UA’s stock performance has been dismal relative to that of their largest competitor, Nike (NKE), whose earnings hit the street Tuesday afternoon. NKE is pegged as one of the strongest performing stocks in the Dow Jones Industrial average, up 35 percent so far. The outlook for NKE, at least from a technical standpoint, is bullish. Conversely, we expect UA’s share price to continue to decline.

Most technical factors for UA are negative and odds are 75 percent for at least $78.1. This then connects to key support at $76.1. Longer-term odds favor $72.5 and $70.5, but we expect a correction to take place before the lower targets are met.

UA - Table

Kase StatWare, shown in the chart below, reflects the bearish sentiment with first class short KEES permissions (pink dots) on the daily bars for the past few days. That said, momentum on the KaseCD and KasePO are setup for divergence and the KasePO is nearing oversold territory. This means that a correction might take place soon.

UA

The one solid positive technical factor was November 22’s hammer. This is a reversal pattern that also indicates a correction might take place before UA falls below $78.1 again. The correction should hold $81.9, but $84.6 is the key threshold. A close over this would open the way for an extended upward correction before the decline ultimately continues.

These are brief technical analyses based upon Kase’s technical forecasting models and trading indicators KaseX and Kase StatWare. If you are interested in taking a trial of KaseX or Kase StatWare please contact sales@kaseco.com. We would love to get your thoughts about the forecasted targets and probabilities. Leave a comment or send them along with your request for a trial to sales@kaseco.com.

By Dean Rogers

The U.S. rig count rose by 17 last week, and according to the EIA, U.S. crude oil supplies have reached 490.7 million barrels, the highest reported level for this time of year since 1930. In addition, the U.S.’s repeal of the 40-year oil export ban could ultimately encourage more pumping from domestic crude oil producers and narrow the WTI-Brent spread closer to parity in coming weeks. This is possibly good news for domestic producers, though it will take months and perhaps years before we will truly know. Overall, it is being reported that these factors could prolong the supply glut that is projected to last through the end of 2016 and possibly beyond.

The narrowing WTI-Brent spread is a being driven by WTI’s deeper contango versus Brent. In January 2015, the two grades were trading near parity, and it looks like this will be the case again in early 2016. This is encouraging for some U.S. producers as the spread could extend into positive territory where $2.60 is a confluent projection. However, longer-term, a narrow spread would likely lead to increased U.S. production, which would be negative for WTI. Conversely, a positive spread could encourage Brent producers to cutback, thus spurring both grades higher over the course of the longer-term. The key will be seeing whether or not the spread becomes positive and remains that way for the next few months. If so, it could lead to a longer-term shift in production strategies, and ultimately prices, world-wide.

WTI-Brent-Spread

Another factor to watch right now is the calendar spreads and the cost of carry. The six-month average cost of carry narrowed a bit for WTI and Brent last week, but remains volatile. Typically, a carry above approximately ($0.50) encourages those with storage to buy oil now, store it, and then sell it at a later date when prices are higher (due to deep contango). This is fundamentally negative because supply rises. The six-month average costs of carry for WTI was ($0.93) and for Brent ($0.79) as of Friday’s settlement.

CostOfCarry

The technical agree with the negative fundamental and spread factors right now. Most momentum indicators are oversold and setup for divergence on the weekly and daily charts. Therefore, a correction might take place soon. However, until a swing low in both price and momentum are made look for the decline to continue. Over the next day or so we expect WTI to fall to $35.0 and for Brent to challenge $35.6. Both are crucial targets to connect to much lower levels as discussed in our full weekly analysis.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary is a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

By Dean Rogers

The outlook for natural gas is still bearish, and without support from weather or a strong increase in industrial demand, it will most likely remain that way. However, there are a few positive technical setups that indicate a small correction to $1.90 and even $1.959 might take place first.

Monday’s gap down from $1.959 still needs to be filled. This might be an exhaustion gap, but at this point it is looking more like a measuring gap that projects to $1.65. Wednesday’s morning star setup indicates prices could make a push for at least $1.90 to try and confirm the pattern. The Stochastic is deeply oversold (and has been for some time) and the KasePO is setup for bullish divergence as it nears oversold territory. If Wednesday’s $1.775 low holds, there is a good chance for the daily bullish KasePO divergence to be confirmed. Confirming the divergence, and confirming the morning star setup with a close over $1.90, would boost odds for filling the $1.959 gap.

NGF6 20151216

That said, longer-term odds still favor the decline and any move up will be corrective and hard pressed to overcome $1.959 without support from aforementioned external factors. Once the correction is complete (if it takes place at all), we expect prices to fall to $1.73 and $1.65.

This is a brief natural gas forecast for the next day or so. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested in learning more, please sign up for a complimentary four week trial.

By Dean Rogers

The darkest hour is just before the dawn. It is a phrase that most are familiar with that provides hope, even in the worst of circumstances. The outlook for WTI crude oil prices has been “dark” in recent weeks, and the longer-term outlook is still dim. However, December 14’s close over $36.13 provides a small shimmer of hope that a correction might finally be underway.

January WTI met a confluent and structurally crucial support target near $35.0 on December 14 and closed above December 11’s $36.13 midpoint to form a bullish piercing pattern. The piercing pattern is an early indication that a sustainable correction might finally be underway. A close over the pattern’s $36.63 confirmation point (December 11’s open) would call for at least $37.9, the 38 percent retracement from $43.46 to $34.53.

CLF6 20151214

The move up will most likely be corrective, but a substantial correction is long overdue. KaseX is not showing any signs of a turn yet, and the piercing pattern’s $36.63 confirmation point was tested and held. This dampens the likelihood of a reversal, but does not wipe out the potential completely. A close below $35.4 would negate the piercing pattern and call for the decline to continue towards the December 2008 perpetual swing low of $32.4.

Therefore, if the sun is going to rise $35.4 must hold and January WTI will need to close over $36.63 and then $37.9 within the next few days.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary is a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four week trial.