Bear Divergence, Stubborn Bulls Expose Potentially Steep Nat Gas Losses | RJO Futures

April 24, 2017 8:09AM CDT

In 18-Apr's Technical Blog following that day's bearish divergence in momentum that reinforced our broader peak/reversal count, we warned of further and possibly steep losses.  Nearly a week on the 240-min chart below shows continued eroding price action in the now-prompt Jun contract with 17-Apr's 3.324 high and 05-Apr's 3.422 high considered our short- and longer-term risk parameters this market is required to recoup to threaten or negate our preferred bearish count calling for further and possibly steep losses.

Jun '17 Natural Gas 240 min Chart

 Jun '17 Nat Gas Daily Chart

The daily log scale chart above shows the bearish divergence in the rate-of-change measure of momentum that, in fact, breaks Feb-Apr's uptrend and exposes the new longer-term trend as down.  It's also important to note that our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC actually WENT UP last week to 73% from the prior week's 71% reading.  This is owed to short-covers rather than additional longs, but nonetheless the whopping 296K long positions to just 108.5K shorts is fuel for downside vulnerability that, combined with the bearish divergence in momentum, we believe exposes further and possibly steep, relentless losses straight away.

These issues considered, a bearish policy remains advised with strength above at least 3.25 and preferably 3.347 required to threaten or negate this call.  A sharp and violent run at and possibly through 28-Feb's 2.827 low in the Jun contract should not come as a surprise, or even new 6-month lows below 2.55 on a weekly log active-continuation chart basis below.

Natural Gas Weekly Chart

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.