With little in the way of fresh news on either the technical orfundamental front, natural gas prices took the path of leastresistance yesterday, slipping lower but settling above key supportat $3.80. After plumbing its lowest point in two months at $3.79shortly after 2 p.m. (EST), the August contract finished stronglyto settle at $3.86, down 2.4 cents on the day.

Traders were quick to point to follow-through selling on theheels of Wednesday’s bearish storage report as the main priceinfluence yesterday. Once the market started lower, however, therewas an added push by floor traders looking to activate sell-stoploss orders that they believed to be waiting below $3.80. When noadditional selling entered the market on the move to $3.79, thoselocal shorts were forced to cover their positions, a Houston-basedrisk manager said.

The market has the impetus to take either of two different pathstoday. One possibility is that there will be another selling pushearly in the session in conjunction with cash prices, which areexpected to suffer weakness associated with reduced summer weekenddemand. If that initial push is successful and sell-stops below$3.80 are ferreted out, then the market could filter lower into theweekend. But don’t rule out a bounce, warned the trader. “If Accessgets going, and [Over-The-Counter] is well bid, then we could see alittle short-covering [Friday],” he said.

While the price direction heading into the weekend is too toughto call, the majority of traders favor prices moving lower in theintermediate-term. One possible catalyst for this move is continuedselling in the front months by traders looking to hedge theirNovember-March longs. “There were a lot of people that bought thewinter when August was trading in the $4.40s. They are now lookingto stop the bleeding and one way of doing that is by sellingAugust,” a trader said. However, that will often backfire, headded, because the selling in the front month will drag down theentire value chain and bring the winter months along with it.

In daily technicals, August has support and resistance at $3.80and $4.055, respectively. As of 6 p.m. yesterday evening, theAugust contract was unchanged at $3.86 in Access trading.

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