NBP bulls in charge but front-summer momentum wanes

Technical analysis of ICIS data suggests that the bulls remain in control of the NBP Summer ’17 contract but that upwards momentum has fallen in recent sessions, indicating a possible plateau or downturn.

The NBP is one of Europe’s largest gas markets and is a key price driver for numerous European gas and power markets. NBP prices can influence other gas hubs including the Dutch TTF and German NCG markets along with British, French and Dutch power markets. The NBP is also the key reference price for LNG in Europe.

The graphs demonstrate the price of the contract since 30 June 2016; its simple moving average (SMA); upper and lower bollinger bands; moving average convergence-divergence (MACD) and signal line; and traded volume on the contract on a given day.

Through July and August, the contract was caught in a steady downward trend, drifting between its lower bollinger band and simple moving average (SMA) a number of times as volatility slowly left the market.

On 22 August, the MACD line crossed below the signal line, typically a sell signal for a trader as it suggests that the market has entered a bearish trend.

Summer ’17 then started to stage a recovery in value from 12 September, after bottoming out at 35.45p/th three days prior.

The uptick became a trend, rather than a correction, when the contract’s MACD crossed above its corresponding signal line on 15 August – typically interpreted as a buy signal for traders.

Four days later, the contract broke above its SMA, further cementing its bullish trend.

The MACD line leapt above the zero line on 23 August, another technical buying signal.

These three indicators helped to propel Summer ‘17 to life-of-contract highs, climbing 21% in a little over a month

Flagging momentum

The MACD histogram, which measures the difference between the MACD line and signal line, peaked at 0.5071 on 6 October when the contract was at its most bullish. By 19 October, the histogram had dropped by over 50% to 0.2242. This indicates the upwards momentum in the market is beginning to wane as the MACD threatens to cross below the signal line.

At 1.429, the MACD is just 8% below its 1.55 high point during its last bullish run in July 2016, which preceded the contract’s summer down-trend.

A falling histrogram, as the MACD approaches a historical peak, are indicative of a market where the bulls are running out of steam. thomas.rodgers@icis.com