This morning's opening call was for futures to open around 30 lower which was right on the money for March's initial pricing, some 28 points lower at 54.25. Between the March and May opening though there was some very bullish options activity, seeing May open unchanged once locals began hedging.
One of the largest merchants was a large seller of at the money March puts on the opening, selling as many as 2000 of the March 55 puts for 140-150 on the opening and then the balance throughout the session. Despite this, the re-opening prices were to be the highs for the day, with locals in particular getting a little long early in expectation of decent price recovery.
Prices started sliding thereafter, with March quickly sailing towards key support at the 54.00 area. Trade buying was noted around the 54.05—54.10 area, and this resulted in a bounce to around the 54.40 level again before late in the session fund selling pushed prices back to their lows.
Spread trading was active again in the March / May, mostly trading around 80 points premium May. Prices closed teetering on the abyss with immediate support of 54.00 looking to be under fire. Estimated volume today was just 13,000 lots.
This morning's spec hedge report was as expected with the specs reducing their position last week from 7.4% net long to 3.9% net long. Over the week they reduced longs by 3,500 lots whilst shorts were increased some 2,600 lots.
Technically, the march contract is continuing to consolidate itself having fallen a swift 3 cents from the highs last week. The 57 cent area high also meets longer term overhead resistance, which adds weight to the turnaround and hence the end of the recent up channel.
Momentum is back to neutral at 45.92 on the RSI having reached overbought levels last week. Meanwhile the moving averages (9 EMA and 50 SMA) are beginning to reconverge which could again negate the original rally back from 51 to 57 cents.
marketing@alchempro.com
