For the third time in as many trading sessions, natural gas futures sifted lower throughout much of the session after posting a strong opening print. However, while trading sessions on Friday and Monday finished with a late rally, Tuesday’s trading action saw little or no bounce, prompting bears to eye the downside and bulls to turn in their horns. The August contract finished at $2.889, down 5.8 cents for the session and just several ticks off its $2.885 low on the day.

Heading into the session, many traders had their sights set on the $3.00-02 area, which forms a potentially pivotal area for technical traders. Should the market break above support at $3.02, most chartists look for a break to $3.09. However, the market didn’t even come close, stalling out in the mid $2.90s. Prior to Tuesday, the August contract had notched five straight sessions of higher highs on the daily chart. Combined with the $2.87 and $2.90 highs from July 11 and 12, that string of sequentially escalating highs has formed a potentially bearish flag or pennant formation, says Tom Saal of Pioneer Futures in Miami.

However, bulls would like to think that technical factors will not ruin the day. For them, the market should be taking its cue from hot weather forecasts and decreased production volumes. According to data from Baker Hughes, U.S. natural gas rotary rig count is up slightly from this spring, but still down more than 30% from year-ago levels.

Meanwhile the National Weather Service weighed in with price-constructive news of its own Tuesday by revising Monday’s six- to 10-day weather outlooks to call for above normal temperatures across the eastern two-thirds of the country this weekend into early next week. Only the West Coast is expected to see below normal readings during that period. Normal temperatures are predicted across the inter-mountain West from Arizona to Montana.

And although both bull and bear may each possess the ammunition to take the market outside of its recent $2.76-3.00 trading range, don’t bet on it happening Wednesday, when traders may be hesitant to initiate a fresh position ahead of the Thursday morning release of industry storage data by the Energy Information Administration. Injection estimates ahead of that report are tightly grouped in the 55-60 Bcf range, which would fall short of last year’s 77 Bcf build, as well as the five-year average increase of 66 Bcf. Last Thursday the market was flung into its typical post-storage report theatrics by a 69 Bcf injection. The August contract finished a dime stronger for the session. Looking ahead at this Thursday’s report, Jay Levine of New Hampshire-based Advest Inc. is cautiously bullish on storage and does not rule out the potential for a rally to be sparked by a price “friendly” injection in the high 50s.

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