NY Harbor ULSD futures fell to a new intraday low for the eighth session in a row, but formed a bullish morning star setup and hammer. These are bullish reversal formations, but in this case it is more likely that a subsequent move up will be a correction rather than a reversal. In addition, the decline stalled near the 62 percent retracement of the move up from 154.8 to 197.86, which supports the likelihood of a correction. However, the KasePO and KaseCD show that the decline should ultimately continue. Look for resistance at 178.7 and no higher than 186.0 to hold.
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NY Harbor ULSD future’s upward correction extended to 177.7 on Monday. The primary wave 158.9 – 171.7 – 160.5, met its 1.382 projection at 177.7 and is poised to extend to the 1.618 projection of 184.2. This is the decision point for an extended correction and potential recovery. Although it is too early to say that a bottom has been made, a sustained close over 184.2 would open the way for 198.7 and 217.7. A close below 164.3 would indicate the upward correction is complete and call for 153.2 and lower.
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The NY Harbor ULSD futures broke lower out of a bearish flag formation on Monday. The break lower was anticipated and then confirmed by KaseX short signals. The decline is now poised to extend to at least 188.9 and then 177.9. The latter is crucial because a close below this would call for 164.1 and 151.9. Initial resistance is the small intraday double top at 199.39. A close over this would open the way for an extended correction to 210.9 and possibly 226.0.
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The HOCL crack spread has narrowed after forming a double top at $27.26. A close below the $18.887 swing low would confirm the pattern. KaseX also indicates the spread should narrow. However, the move may be corrective. Crucial support at $22.38 is the 62 percent retracement from $18.887 and the 38 percent retracement from $14.987. A close below $22.38 would call for $19.5; the last level protecting $18.887. Resistance at $25.6 is key. A sustained close over this would open the way for $31.14 and higher.
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December 2014 NY Harbor ULSD futures have formed a rectangle pattern. A break out of the rectangle will provide a near-term direction. Monday’s close below Friday’s midpoint indicates the pattern will likely break lower. Upon a close below 243.5 look for the pattern to break lower and decline to at least 236.4, which then connects to 225.1 and 213.2. A close over 253.8 would call for a break higher, and would open the way for 259.7, 267.4, and 282.1.
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Successful long term hedging requires logical decision-making. Hedgers need to understand the underlying structure of the market and longer-term behavior in order to find points that minimize the risk and maximize the results of a hedge plan. It is also important to find the best balance for your company between budget oriented goals and achieving better than market prices. The HedgeModel identifies these low risk points and can be custom tailored to whatever strategy is befitting your mixture of goals and risk tolerance.
The HedgeModel is statistically based and does not require any previous trading experience to use. It is more-or-less mechanical and requires only 15 to 20 minutes per day to operate. It is data driven, so it works on any historic data stream in energy, including natural gas, crude oil, refined products, petrochemicals and crack spreads.
The Natural Gas Hedge Report is a companion product to Kase’s HedgeModel that includes a forecast for the perpetual, three-, six- and twelve-month strips. It also includes recommendations on how to set hedging strategies for the forthcoming quarter, changes to the settings used by HedgeModel, low-risk hedge targets, recommendations on what instruments to use, a track record and mark to market of recommended strategies, and research results.
Kase also performs ongoing research into market behavior and structure. Our research is oriented toward improving the results of our clients’ hedging strategies. In addition to a thorough evaluation of basis and correlation analysis, standard research in our quarterly Hedge Reports includes Monte Carlo simulations for estimating price distributions and objectives, statistical analysis of price and volatility, and cyclical behavior.