\April Crude Oil:
Few markets have suffered from headline-driven selling quite as bad as crude oil, having closed lower in six straight sessions. Over those six sessions, crude oil has lost 17.8% and dropped to the lowest level since December 2018. Fortunately, the December 2018 lows should offer good support should selling continue this week. If the 2018 lows give way, spot crude oil prices would be challenging the $40 handle rather quickly, which is the only level of support between prompt prices and the 2016 lows around $26.00. Momentum indicators are the encouraging factor when it comes to energy prices as they have bottomed and made higher lows as price dipped to new lows. This is a textbook bullish divergence in momentum and could be an early sign of a looming corrective bounce. Unfortunately, according to the volume profile, nearly all of the contracts which have changed hands have done so above current prices. This offers no clues as to where buyers or sellers will emerge. We would be mindful of any short-term bullish divergences in momentum but ultimately will need a recovery back above a corrective high of merit to warrant moving to a neutral risk stance. With the severe sell-off in prices last week, we would want to see trade back above $49.31 before feeling comfortable in limiting bearish exposure.
April Natural Gas:
One of the only markets that have been hit harder than crude oil is natural gas. On Friday, spot natural gas prices hit the lowest level since March 2016. If natural gas were to keep trending lower, and eventually break the $1.611 level from March 2016, natural gas prices would be trading at the lowest level since 1995. Similar to crude oil, the groundwork is laid for a potential bullish divergence in momentum should indicators find traction with early week trade. Also like crude oil, unfortunately, spot prices need to rally significantly to give even the faintest hint the downtrend is over. When a market sells off to the degree crude and natural gas have, they leave very few corrective risk parameters in their wake. At the very least, natural gas prices would need to recover above the corrective low from $1.753 on Feb. 11, which was former support, turned new resistance. There are no moving averages within spitting distance as the 50-day sits all the way up at $2.002. Without such a recovery, trends remain down on all applicable scales with the sell-off expected to continue, if not accelerate, in coming sessions.
April Heating Oil:
Where crude goes, products are likely to follow, and that would certainly be the case for heating oil. A severe sell-off the last several sessions, although both Thursday and Friday's price action saw settlements well off session lows. This could be an encouraging sign as selling could have reached an exhaustion level, an early sign consolidation and a recovery are forthcoming. Because of the selling exhaustion late in the week, momentum indicators already look as though a potential bullish divergence could be occurring with price. Like crude and natural gas, spot prices would need to recover back above the $1.5684 corrective low from Feb. 4 to lend credence toward the idea the sell-off is over for now. A fair amount of volume changed hands between $1.6103 and $1.7140 when the consolidation was taking place in late February. This could also offer a round of resistance if a recovery attempt is going to be forged. February is usually a good time to lock in diesel costs for producers, and this year is proving to be no different. Cash diesel prices are down 15 cents to 30 cents per gallon over the last month, so producers should be looking at locking in needs for spring and summer.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.
Tregg Cronin can be reached at firstname.lastname@example.org
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