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Nat Gas Spike Reinforces Bullish Count, Defines New S-T Risk

Posted 10/30/2019 11:13AM CT | RJO Market Insights

Today’s continued rally above yesterday’s 2.704 high reinforces our base/reversal count and leaves today’s 2.616 low in its wake as the latest smaller-degree corrective low the market is now minimally required to fail below to stem the rally and expose at least an interim corrective setback.  Per such, this 2.616 low is considered our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a still-advised bullish policy and exposure.

As recently discussed, this week’s bullish divergence in momentum above 04-Oct’s 2.568 high confirms the bullish divergence in daily momentum that  not only breaks Sep-Oct’s downtrend, but also reinforces our major base/reversal count that contends Sep-Oct’s steep relapse is a (B- or 2nd-Wave) correction within a major, multi-month base/reversal process from 05-Aug’s 2.339 low.  Historically bearish sentiment/contrary opinion levels, a complete 5-wave Elliott sequence down from Mar’s 3.165 low and the rejection of the lower-quarter of the past 10-YEAR range all contribute to the bullish count that warns of potentially protracted, multi-QUARTER gains to $3.00 or $4.00-handle prices similar to other intra-10-year-range rebounds.

The monthly log chart below shows these base/reversal-threat facts and the extensive rebounds that have occurred over the past 10 years under similar momentum, sentiment and lower-range conditions.  A preponderance of price action between Jul’18 and Sep’18 between about 2.50 and 3.90 is hard to ignore as a resistance candidate in the months ahead.  But until and unless this market relapses below at least 21-Oct’s 2.413 larger-degree corrective low and new key risk parameter, and preferably below 05-Aug’s 2.399 low in the Dec contract, we believe this market has upside potential to at least deep into a $3.00-handle and possibly to $4.00+ in the quarters ahead.

These issues considered, long positions from 2.505 on Mon’s gap-up open recommended in 25-Oct’s Trading Strategies Blog remain advised with a failure below 2.616 required for shorter-term traders to take profits and move to the sidelines to circumvent the depths unknown of a steeper corrective setback.  A bullish policy and exposure remain advised for long-term players with commensurately larger-degree weakness below 2.413 required to negate this call and warrant a move to the sidelines.  In lieu of such weakness, further and possibly accelerated gains remain expected.

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