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COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 6, Orleans, Massachusetts
(September 24, 1997) ENERGY COMPLEX: HEATING OIL–Refinery problems in Venezuela may tend to support the heating oil for the short term, but supplies are ample. El Nino seems to be appearing even in energy forecasts, but there is little consensus. However, seasonals should be suggesting higher prices shortly. Unless the refineries under produce, the move this year could be more subdued than last year.
RESISTANCE–Resistance basis November is 5580-5590 and 5620.
SUPPORT–Support 5510 or so, 5430-5443, 5305-5325, 5355-5365.
RECOMMENDATION–Aggressive traders might buy Nov. in the low 5500's with stops of 100 points or under 5430. Use stops, as it is by no means certain that the low is in. Option traders might buy January calls and sell November calls as a calendar spread, or buy December near the money calls on pullbacks. Be willing to exit the trade on a reversal or failure, or if the market makes new lows. Do not be in a hurry to put this on if a seasonal player. It's still a bit early, and so far the weather does not justify the trade.
NATURAL GAS–Strong cash prices and short-covering sent the natgas sharply higher. However, profit-taking chiseled off some of the gains. Overall natgas stocks remain above last year's critically low levels, but are under the average of the last three years, which is supportive. The trade is focusing on tight near term stocks, and many players are said to be short.
RESISTANCE–Resistance near 3110 and 3250 basis November
SUPPORT–Support lies near 3080, 3000, 2810-2830, 2780, 2745-2760, 2610-2630.
RECOMMENDATION–While the action was positive, I find I'm not enthralled by the chart. If November natgas takes out 2925 in a meaningful way, it could signal a decline to the mid 2600's. Very aggressive traders could buy a dip to the low 3000's, upper 2900's with stops to reverse under 2925. There is still the potential for a move to the 3200 area.
M. Steven Morgan
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