Bulls saved their best for last on Friday. After being held to an extremely-tight, 7-cent trading range throughout much of the session, natural gas futures shot high during the closing 75 minutes of trading in concert with a spike in the nearby crude oil pit. At the closing bell, June natural gas futures were up a modest 4.3 cents or 1% at $4.291. Comparatively, June crude was up an even dollar or a little over 3% at $29.91.

Friday’s late rally, while small in absolute terms, packed a punch on both the daily and weekly perpetual charts, technicians agreed. By virtue of the 4.3 increase, the June futures contract was able not only to notch an up-day on the daily chart, but also made a higher close on the weekly chart, prompting some traders to suggest the market has once again tested, but failed to break beneath, support in the $4.10s.

However, not all are convinced this market has seen the last of sub-$4.20 futures. For Tom Saal of Miami-based Pioneer Futures, the market looks less like it’s picking a bottom, and more like another sideways congestion range. “The last time the market was behaving like this was a month ago when we were trading just above $5.00…..We have all seen what happened to prices since then.

“Air conditioning load is coming, hurricane season begins June 1 and technically the market is oversold. All of the factors would suggest the market is in store for a price rebound. The problem is that the storage situation remains extremely bearish. We will likely see another injection of about 100 Bcf this week. Then you’ve got the historically low demand period of Memorial Day weekend to contend with. It’s a difficult market to call right now.”

Because of this uncertainty, Saal advises his clients to trade the spreads right now by taking advantage of the widening differential between June 2001 and January 2002. While that spread has been as narrow as 52 cents recently, it is now trading at 63 cents. He recommends selling that spread at 64 cents, 68 cents and 74 cents as it continues to widen.

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