Feeding off Wednesday’s strong close, natural gas futures spikedhigher yesterday morning, but ultimately finished lower in anextremely quiet session. After notching a new life of contract highat $2.90 shortly before noon (EST), April was hit with light profittaking which demoted the contract to $2.851, a 1.5-cent loss forthe session.

While some traders were impressed by the prompt month’s abilityto post a fresh high, others believe that recent daily highs of$2.865, $2.88, $2.875, $2.885, and Thursday’s $2.90 indicate themarket is searching for a top.

For Tim Evans of the Pegasus Econometric Group, however, it isthe fundamental factors, and not chart patterns that dictate aprice erosion. “The year-on-year storage deficit of 333 Bcf was 436last week and as high as 522 during February, but this trend hasnot discouraged the buyers. Neither have they flinched at adding tolong positions in the face of forecasts for warmer than normaltemperatures, which they apparently take for evidence that thesummer will be hot. At some stage this perversion of logic willhave to bend the laws of supply and demand, but that day hasapparently not yet arrived,” he wrote in the Pegasus Natgas Report.

Looking ahead, Evans targets the $2.80 level as a pivot for themarket now, with a break putting pressure back on Wednesday’s $2.75low. If the market fails to hold there, he sees additional supportat the $2.67 and $2.495-55 levels.

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