The June/October Natural gas calendar spread has been in a -$.036 to -$.077 balance bracket over the past 30 trading days.

On Friday, the market took out the -$0.77 balance bracket low with no follow through. Additionally, Monday’s range remained within the balance bracket range, and also inside Friday’s trading range, making it an “inside day.” An “inside day” is a form of balance and an “inside day” within a balance bracket is “balance within balance.”

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GO/NO GO LEVEL

The term “GO/NO GO LEVEL” was coined by my mentor, Jim Dalton. Jim uses that term when a market reaches an important reference where the odds of a significant move, in either direction, are high. In this case, the lower extreme of the balance bracket is the the GO/NO GO level.

When the market tests an extreme of a balance bracket the two most likley scenarios are 1) gain acceptance outside the balance bracket and accelerate or 2) Trade outside the the balance bracket and get rejected, which would likely begin a rotation to the opposite end of the balance bracket.

DOWNSIDE SCENARIO

If the market breaks from the inside day to the downside, it may test the -$.084 to -$.091 gap below. Acceptance below that gap and the the market may test the -$.107 previous balance bracket high.

UPSIDE SCENARIO

If the market breaks from the inside day to the upside, the market may begin a rotation back up to the -$.036 balance bracket high.

Be patient entering a trade as most times it is better to be a little late entering a trade than a little early.