Price Forecasting Archives - Page 19 of 24

Natural gas is idling in neutral again and is struggling to overcome key resistance levels. We are still negative for the longer-term, but the near term outlook is looking slightly positive.

The small move up is confirmed by long KaseX signals (green diamonds) on the $0.035 Kase Bar chart. In addition, Wednesday’s close over $2.895, the 1.00 projection for the wave up from $2.785, has opened the way for its 1.618 projection near $2.96. The $2.96 target is crucial because it is the 0.618 projection for the wave up from $2.644. A close over $2.96 would call for an extended correction to targets above $3.00.

Other than the quick move up from $2.644, the recent move up has lacked conviction. A daily evening star setup and hanging man indicates traders are still not quite sure if the market is ready to make the push higher. Tuesday’s $2.84 open is first support, and a close below this would call for another test of the $2.785 swing low.

This is a brief natural gas forecast ahead of tomorrow’s EIA report. 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.

August natural gas is attempting to rally above $3.00 after stalling at $2.644 last Thursday. The surge over the last week may be a desperate attempt to push prices to targets above $3.00 before summer’s end, and is being driven by speculation of above normal temperatures through the end of this month and into August.

The near-term outlook took a positive turn Wednesday when prices closed above $2.884, the 0.618 projection of the wave $2.588 – 2.977- 2.644. This clears the way for a rally to the 1.00 projection of $3.03. This is a potential stalling point for the upward correction. A close over $3.03 would call for the $3.20 confluence point with intermediate resistance at $3.11.

Caution is warranted though because it is a bit early to get overly exuberant about a bullish recovery. The balance of bullish and bearish factors is razor thin and shifts day-to-day. The move up is almost certainly corrective of the longer-term decline. Do not be surprised to see prices pull back and settle below $2.82 on Thursday should there be a disappointing EIA storage report. This, in turn, would call for $2.75 and lower.

Perfect geometric formations are a rare commodity. They are useful gems of information that can tell us a lot about a market’s outlook and general direction. It is important to pay attention to the implications of a successful break out of the pattern, and it is even more important to watch for patterns that fail.

WTI’s bearish flag on the $0.50 Kase Bar chart is as close to a textbook example as one will ever see. Flags are extremely reliable continuation patterns. Because this flag formed after a decline, and is sloping upwards, it is a bearish pattern that indicates the move up is corrective and that the decline should continue.

The waves within the flag have fulfilled the 1.00 projection for the wave $50.58 – 53.43 – 50.91. This is significant because it is evidence that the move up is unfolding as a three-wave ABC pattern, which is more evidence that the move is corrective.

Prices settled in the lower half of the formation on Monday, which does not bode well for another test of the upper trend line. A close below $51.8, which is near the bottom trend line, would indicate the move down is going to extend to at least $49.9. Our detailed weekly analysis discusses the connections to targets in the mid- to low-$40s upon a break lower.

There is an outside chance that the formation will fail, but prices will need to close over $54.8 to prove that an extended upward correction and potential recovery is underway. Technically, the flag will fail upon a close over the upper trend line, which is currently $54.2. However, for many technical reasons, $54.8 is the threshold for a positive near-term outlook. Most importantly, it is near the 38 percent retracement of the decline from $62.22 and the midpoint of July 6th.

For now, watch the flag formation closely. Odds favor a break lower and close below $51.8. The directional breakout of this pattern will be a strong clue as to the direction of WTI for the next several weeks.

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

by Cynthia A. Kase

Read on TraderPlanet.com

After last year’s viral outbreak that killed millions of hogs, pork production, now having recovered, looks to set records and overshoot demand. Apparently some commodity advisors are panicking and recommending that their producer clients use lean hog futures to hedge and avoid even lower prices. Is this a good idea?

To our view, hedging hogs today would be like closing the sty door after the pig has fled. In Kase’s energy practice, producers hedge when markets are enjoying high prices, not when already painfully low. At this point, defensive measures are called for.

The reason I’d be a reluctant outright seller or short hedger is that prices have been rising over the past few weeks, not falling. Looking at the August 2015 contract, prices fell from a 95.35 high last November to a 71.175 low June 22. Then the KasePO and KaseCD momentum indicators generated bullish oversold and momentum divergence signals. A 71.275 swing low followed, forming a classic “W” shape, or double bottom.

Last week’s candlestick completed a classic bullish morning star. However, the pattern remains unconfirmed until a close over 76.65, dampening the bullish tone. Also, the daily chart shows a potentially negative Harami line with two stars.

While the overall structure is down, the current 6 cent bounce could continue to 79 and maybe 81.5. A close over 81.5 hasn’t high odds right now, but if it happens we could see another 10 cents. 79 is the 2*1.38 extension and Phi2 corrective projection for 71.175 – 74.05 – 71.275. For the final wave up spanning from July 2 to July 7, 75.175 – 77.275 – 75.625, 79 is the 1.62 extension and 81.5 is both the trend terminus (77.2753/75.1752), and 2*1.38 extension.

If there isn’t a close over 76.65 soon, the rally might fail. A close below June 2s open, 75.15, followed by 72.4 would be cause for concern. A close below 70 could send lean hog prices squealing – potentially to 55 cents as, from a technical standpoint, targets ranging from 67 down to 55 have similar odds.

72.4 and 70 are KaseX stops. The key wave, 95.35 – 86.00 – 90.65, targets 70 as the important 1.62 extension. The last down wave, 77.275 – 75.625 – 76.625 targets 72.4 as the trend terminus (77.2753/75.6252), 2*1.38 extension and Phi3 corrective projection.

Here’s my hedging strategy. If you’re ok with “getting called”, sell calls above the market, maybe just above 81.5, perhaps purchasing puts on the downside with the funds depending on your risk appetite and whether you need to qualify for hedge accounting. Otherwise wait for a drop below 75.15 or so, then scale-in short calls maybe five cents or so above the market, again possibly buying puts. Meanwhile, grab a beer and a brat and watch the thresholds.

Send questions for next week to askkase@kaseco.com, and for energy hedging visit the Kase Energy Hedging Services page.

After the 4th of July weekend the energy markets, unlike the weather across most of the U.S., heated up. The lack of warm summer weather in key areas of the county has given way to lower prices for natural gas. August natural gas futures finally closed below $2.73 on Tuesday and Wednesday. The move has been quiet relative to the noise being made by crude oil, but the break lower indicates prices should continue to decline. That said, the bullish KaseCD divergence and KasePO PeakOut (oversold signal) on the $0.035 Kase Bar chart indicate the decline will be a grind.

The wave $2.977 – 2.733 – 2.885 took out its 0.618 projection at $2.73, therefore odds favor at least $2.64, its 1.00 projection. This is a highly confluent and important target that protects the $2.588 swing low. We expect to see a bounce from $2.64 given its importance. A close below $2.64 would call for $2.55 and $2.50.

The 38 percent retracement from $2.885 to $2.676 is $2.76. Key near-term resistance is $2.81, the 62 percent retracement. Both levels are in line with the two previous intraday swing highs of $2.756 and $2.80. A close over $2.81 is unlikely unless tomorrow’s Energy Information Agency (EIA) report is extremely bullish.

As predicted WTI crude oil has broken lower out of the recent trading range and fell by nearly eight percent on Monday. The important 1.382 projection was met at the $52.41 swing low. Key support at $50.5 should be tested tomorrow. We consider this a decision point for a much more bearish outlook and decline into the mid-$40’s. Today’s action may even dust up talks about the $30s again, though we think that conversation is a bit premature. Look for resistance at Monday’s $54.4 midpoint. This may be tested in early trading Tuesday, but should hold.

Markets are rarely more balanced that what we have experienced for natural gas over the past few weeks. After August failed to overcome $2.95 it stalled at $2.73, and is now in a mini-range between $2.73 and $2.87. Considering this week marked the end of the month and quarter, and is shortened due to the 4th of July holiday, a breakout will likely be delayed until next week.

The market is waiting for factors like summer weather and/or supply/demand issues to give us a breaking. The longer it delays the move up though, the more prices will erode away until it is too late to make a meaningful push higher.

It is still a bit early for the market to give up on a summer rally, but based on many technical factors we favor a break lower out of the mini-range between $2.73 and $2.87. This morning’s failed attempt to overcome $2.87, bearish KaseCD divergence and first short signal confirm our call. This would open the way for a confluent $2.64 target.

Should prices close over $2.87 look for another test of $2.95, which is the key threshold for a push to levels above $3.00 and a summer rally.

This is a brief natural gas forecast ahead of tomorrow’s EIA report. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested, please sign up for a complimentary four week trial.

by Cynthia Kase

Those of us who can remember KC and the Sunshine Band’s emergence in 1975 are now in need of a different kind of KC – coffee futures – to stay bright. Baby Boomers may be counted on to steadily drink the stuff, but it might be another kind of baby who might ultimately determine how much we’ll have to pay for it – El Niño.

The price of coffee futures for September delivery having made a high of 232 (cents) last fall, purportedly because of drought conditions, fell by almost half to make a 126.3 low in late May. Despite a bit of a bounce prices dropped to 127.9 last Friday. Having held May’s low is it now time to buy?

The National Oceanic and Atmospheric Administration apparently has identified El Niño conditions and is saying there’s a 90 percent chance the baby will stick around all summer, and maybe even into 2016. The possible effects on coffee are unclear as production in some regions could get a boost from wet weather offset by drought conditions elsewhere. Let’s see what the technicals say.

On the positive side, the monthly chart has a bullish Harami line and star. Also the wave patterns form a symmetrical, nested ABC pattern as marked on the chart.

In an attempt to break above earlier support at 135 (see green line), Tuesday’s 134.85 failed and gave back 6 cents thereafter. Prices, more or less have traded sideways for the past few days as circled. On June 10, an attempt to break 141, the bottom an old corrective pattern, also failed.

Dead sideways markets are difficult to call, but my bet is that 126.30 will be broken, and that there’s potential for 100.

The overall structure is down. Sustained closes above 141 will be needed to begin a reversal. This is not only the previous swing high, but also the 1.62 extension for the small wave up from 127.9, and Kase daily DevStop 3 and weekly warning line. Next is a highly confluent 150, the trend terminus, Y3/X2 value, 2*1.38 extension for the small wave, and 1.38 extension and f corrective projection for the wave up from 126.3.

On the downside, first support which must be definitively broken for a renewed bearish tone to take hold is 123.2, though the old 122.95 might become secondary support. Below this area, targets are 117.5, 109.5, and 100 – all confluent wave projections. Focusing on 100, that’s the 2*1.38 extension for the first wave down from 232 to 191.75, and the 1.38 extension for the next from 232 to 167.85, as well as a critical threshold as the weekly DevStop 3 value.

So unless and until coffee futures overcome resistance, watch each support level to see which might produce a reversal. Meantime, maybe relaxing to an old LP as you sip a cuppa joe is in order.

“Ask Kase” any question you may have about any actively traded security, and your question may be chosen as the subject of a future column (askkase@kaseco.com).

Remember to send your questions for next week to askkase@kaseco.com, visit www.kaseco.com, or check out Kase’s latest on www.wiley.com.

RBOB gasoline prices are weak after stalling at 218.58. This was an important confluence point because it was the 50 percent retracement of the decline from 315.2 and the 0.618 target for the wave up from 122.65. The move up was exhausted once it reached 218.58 and negative factors like a bearish KasePO divergence have shifted near-term odds in favor of a pullback to 199.7 and 188.1 over the next few weeks.

That said, the pullback is most likely corrective.

Our studies show that nearly 80 percent of waves that meet the 0.618 target extend to at least the 1.00 target, which is 244.39 for the wave up from 122.65. This is also near the 62 percent retracement from 315.2. The only way to negate a wave’s projections is to take out the swing low of its correction, in this case, 169.25. Therefore, while 169.25 holds the longer-term outlook for gasoline is positive and favors an extension to 244.39.

Taking out the 244.39 swing low would be extremely bearish for gasoline prices. Right now we don’t that will be the case, but closing below 188.1 support will go a long way to increasing the odds of ultimately taking out 169.25.

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, please sign up for a complimentary four week trial.

Last week we discussed the chart below and the importance of $2.92 as the 0.618 projection of the wave up from $2.54 (not shown) and the 62 percent retracement from $3.15. The chart is being shown again, with a few updates, because not much has changed over the past week.

The crucial $2.92 level has been tested four times now, including this morning’s brief excursion to $2.955. Because prices failed to close over $2.92 again, we expect to see another oscillation lower to challenge support at $2.80. This is the 38 percent retracement of the move up and is near Monday’s $2.83 midpoint and Tuesday’s $2.831 low.

The bearish KaseCD and KasePO divergence and the DevStop2 hit on the $0.035 Kase Bar chart support the move lower and test of $2.80 tomorrow.

Tomorrow’s EIA may be the catalyst the market needs to either close over $2.92 or below $2.80. A close over $2.92 has strong bullish implications as discussed in our weekly natural gas forecast. A close back below $2.80 would call for another test of support and possibly the contract lows. For now, $2.92 and $2.80 are the levels to watch for clarification of the near-term, and possibly the longer-term, direction.

This is a brief analysis ahead of tomorrow’s EIA report. Our weekly Natural Gas Commentary is a much more detailed and thorough analysis. If you are interested, please sign up for a complimentary four week trial.

Midweek Natural Gas Forecast – July 22, 2015

Tag: Price Forecasting