The April Nymex contract gained 3.7 cents to settle Friday at$2.321, thanks to what one broker called strong fund buying.However, April may be hard pressed to add much more to that.According to the latest Commitments of Traders report,non-commercials extended their net long position by 7,649 contractsto 9,543 during the last two weeks. The broker estimates that 60%of those positions are in April, which would mean these speculatorswould have to wind out of approximately 5,700 April contractswithin the next four weeks. However, if April breaks out of itsrecent technical trading range within the next several days, it islikely funds will add to their overall long position, meaning moreselling pressure would mount on April and May as we approach theApril expiration, a source argued.
Another broker reported two major developments as far astechnicals go. Number one, “the market remains oversold on the longterm charts. Since the goal of technical trading is to trade withthe trend, and because trends take time to develop, it isparticularly significant that the longer term charts are flashingbuy signals.”
He also noted that April is currently mired in the middle of asymmetrical trading pattern. “About 85%-90% of the time, a (naturalgas) futures contract will continue to trade in the direction ofthe breakout of these triangles,” a broker said. Since thattriangle continues to narrow, the breakout could come within thenext week or so, he predicted. Presently, the triangle is bound byresistance at $2.335 and support in the $2.25 area, he said.
If April breaks out of the triangle to the upside, its firstobjective will be to fill in its chart gap at $2.355, a techniciantold GPI. After that, he places resistance at $2.40, followed byApril’s all-time high trade of $2.460. Any move below $2.25 wouldface support at $2.19, he said.
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