After weeks of flirting with the $6 resistance level, May natural gas futures finally broke it Monday, spending a majority of the day above May’s previous high of $5.99, which was set on April 1. The prompt month settled at $6.009, up 6.8 cents on the day, while trading within the $5.890-6.030 range.

A Washington, DC-based broker said he had expected Monday’s market action, noting that nat gas sort of took its cue again from oil. “The crude price really didn’t sell off after what I would have assumed was a little bit of insurance buying and risk/premium buying on Thursday for over the weekend. The natural gas was dragged up by crude’s run on Monday, although not as much as normal, as we have officially entered the shoulder season with regards to gas storage.”

Continuing its recent run, Nymex May crude settled 70 cents higher Monday at $37.84. Traders speculated that the run-up was partially attributable to America’s supply fears along with unrest in Iraq.

Now that the $6 level has been penetrated, the broker said the next question that needs to be answered is whether the level can hold. “The bias is to the upside. You can argue with why the trend is what it is, but it seems pretty bullish when you’re looking at it.” Despite first impressions, the broker said “the overall much larger trend is currently down, and the rallies are corrective waves. This could go up to as high as $6.20 and still technically be a correction.” He added that above that level, you would have to take a much more bullish tone.

Craig Coberly of GSC Energy said Monday that he has two concerns with the current bullish outlook. “First, since April 6, price action has been rather lethargic, with upward moves coming grudgingly. This price action is a bit abnormal in the face of a short-term outlook for a 40-cent rally. Secondly, the intra-day stochastic oscillators are becoming a little overbought.”

While noting that these factors are a “bit out of character with the bullish outlook,” Coberly said for the time being he will consider these features as warning signs and will stay with the bullish outlook. “Trading below 5.80 would change the short-term outlook,” he said. “In this event, a decline to about 5.66 will be likely before gas resumes its assault on the 6.40 area.

Cynthia Kase of Kase and Company said earlier Monday that she believes that the market remains much less predictable at present than is usual. “We still think that prices could just stagnate in the current $5.70 to $5.99 area and there is still a chance that a transitory spike towards $6.10 could take place,” she said. “Now, though the odds of a very major breakout either way have increased dramatically if $6.10 is hit.”

Kase believes that if $5.99 or so holds, then a lackluster relaxation to $5.70, the same as last week, would be the likely case, as the market tries to figure out what it wants to do. “However, if the market maintains a sustained close over $6.02 or hits $6.10 we think odds favor the bullish case,” she said. “If at such a point, prices do not take a clear, immediate and sharp decline, our estimate is that the very bullish case switching to primary has at least 2:1 odds.”

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