Natural gas futures continued lower Thursday as a gap-lower open and follow-through selling on the heels of Wednesday’s bearish storage report pressured futures prices briefly beneath the $4.20 level. At the closing bell, the prompt June contract was a nickel lower on the day at $4.248.

“Shell-shocked” was one Houston-based trader’s description of the market following a two-day period in which prices traveled first up and then down for a combined 60-cent move. “Buyers were a little tentative at first—especially those that picked up length late in the move higher Tuesday. However, we once again saw pretty good buying support when prices tried to move beneath the $4.20 level. Each time sellers have tried to push prices below $4.20, the buyers have stepped up and [Thursday] was no different.”

Other traders agreed and were even impressed with the market’s ability to rebound higher in the face of such downward momentum. With its $4.248 close, the June contract finished in the upper half of its $4.18-27 trading range, leading some to suggest prices could rebound today. But according to Tim Evans of New York-based IFR Pegasus, there exists one large and hard-to-overlook difference between yesterday’s move lower and prior forays down to the $4.20 level. “Given that the storage deficit is smaller now than it was then, there is a fundamental case for a new low and the psychological $4.00 mark may not hold either. June might arrive at that level with more downward momentum now, swamping the buying interest and knocking June toward the long-term support of the $3.61-76 spot bottom from last July,” he said.

To take advantage of this predicted move, Evans has entered into a 50% short position in June futures at $4.42, with a buy stop at $4.52 to limit his risk.

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