Natural Gas [NGAS] Incoming Bull Stretch

11/19/2017:

Natural Gas (Henry Hub) has been in a downward consolidation pattern since the beginning of 2017 when it began to decline from the strong 2016 year which had the price ending at $3.90/MMBtu. It has been bouncing in a downwards descending triangle pattern with support around $2.80/MMbtu throughout 2017. Some would argue it looks like an unconfirmed head and shoulders pattern. However instead of completing the bearish pattern, the price has broken upwards in September 2017 and appears to have a number of technical indications for a potential incoming bull stretch.

Weekly Chart

Looking at the weekly chart we can see the breakout in price action which was nicely met with large amounts of volume coming in. In addition, the weekly 50 SMA and weekly 200 SMA look to be acting as support at this levels are appear to be about to cross. This is a strong weekly golden cross indication.

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Still on the weekly chart and zooming into the past years price action, we can see that in the past couple of weeks after the breakout, the weekly 20 EMA decided that it was not going to cross below the 50 EMA which has acted as support with the $2.80/MMBtu pivot. As the price stays above the weekly 20 EMA and it begins to rise, this is a bullish signal in the intermediate term.

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Daily Chart

The daily chart gives more confirmation of bullish strength. After the breakout, the price has been acting technically well by bouncing from the 1.272 and 0.764 Fibonacci retracement levels. Furthermore the recent pullback support was met with the daily 20 EMA.

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When analyzing the market sentiment, we can use the On Balance Volume (OBV) indicator. On the daily chart there has been a bullish break in the OBV trend indicating buyers are starting to enter the market and a trend is forming. Furthermore, it appears as if we may see a golden cross on a daily level. The next target we anticipate for natural gas is the next Fib level at $3.35/MMBtu where there was also previous resistance. It would be healthy to see a pullback at those levels and then test previous $3.90/MMBtu highs at the beginning of this year.

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Update 11/26/2017:

Unfortunately the previous levels of the 50 and 200 SMA did not hold support and the price of natural gas ended up falling down to about $2.80/MMBtu where it found major support. The latest candle shows a gap up from the major support with oscillators favoring another attempt at the upside. The OBV trend is indicating that buyers are still in the market and have not sold off yet – another good sign. Next major level will be at $3.00/MMBtu which coincides with both the moving averages and if it clears that, we could be seeing $3.35/MMBtu in the intermediate term.

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Update 11/29/2017:

We got the MACD crossover coupled with the Stochastic RSI with that gap up and continued higher over the next two trading days reaching at the current resistance level of $3.20/MMBtu. Should this break higher, the first intermediate-term target is about $3.40/MMBtu and the second is $3.75/MMBtu. We will be watching closely as these are critical levels to confirm the triangle breakout. An influx in volume would be a bonus if we break through current levels.

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TSCO Puts

10/11/2017

Weekly Chart

Tractor Supply Company (TSCO) which trades on the NASDAQ with a market cap of about $7.7B has been on a strong uptrend since 01/2010 when it was $13 rising it’s peak in 04/2016 at $97. Since then, it has been forming lower lows and lower highs and created a bearish head and shoulders formation starting with the left shoulder in 2013. In the past couple of weeks TSCO has been re-testing the neckline of the H&S and could be headed lower if it gets rejected.

The weekly 50 EMA (red line) has acted as support levels since 2011. This moving average was fully breached in 09/2016 with a 20% drop in a single day due to the company trimming guidance on 2016 revenue, causing analysts to cut their ratings. More recently, the weekly 20 EMA has been a level to watch for resistance levels. The 20 EMA has breached to the upside at the end of August only to be rejected by the neckline pivot before even testing the 50 EMA. The 20 EMA is a level to watch for now but the long-term trend is currently down. Levels in blue indicate possible targets for the downside (low 50’s is the first target).

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Daily Chart

On the daily chart, TSCO has seen the start of a build of higher highs with the formation and completion of an inverse head and shoulders pattern with the dotted-green neckline indicating that the intermediate-trend is bullish. As shown, this bullish move was rejected by the weekly head and shoulders neckline (dotted-red line) which coincided with the 200 SMA. A double top has formed at this resistance level. Should TSCO find support it will be at the inverse head and shoulders neckline which coincides with the daily 50 SMA. Otherwise it will retest the low 50’s experienced in July. If it does get to these levels, the low 50’s will act as some strong support due to the gap support (red box) from a gap-up from 01/2013. I’ve entered LEAPS Put options at the neckline resistance and will hold through for now. The next ER on October 25, 2017 should catalyze the price movement.

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UPDATE 10/31/2017

Closed Out of All Positions

A little late on the update. TSCO has been on quite the ride after the ER on October 25th which dropped the stock to as low as $54.80 on the open of the 26th. This 5% gap down was met quickly with some intraday volatility. If the gap were to stay open, I would have held my positions but decided to close them as the gap clearly filled and confirmed early on October 30th as it passed the $58.00 mark. I would have liked to see some more momentum to the bears, but we got lucky with the massive price drop after ER especially on such a bullish report. Happy to take profits and eye for another setup.
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