Natural gas futures bears took the day off as the April contract traded in a slim dime range before closing out the regular session at $4.708, up 2.9 cents from Monday’s finish. However, with the winter finishing up its long run, traders don’t see too many technical or fundamental factors standing in the way of further declines.

“We turned moderately bearish at the beginning of last week and then our volatility started to expand as the market moved even lower. According to my data, volatility is still net expanding so I would continue to be in the moderately bearish camp,” said a Washington, DC-based broker. “For the moment the oscillators are laying in bearish territory and are headed nowhere fast. I don’t think we can look for any help from an oversold bounce. I would still stay short — or at least avoid buying — and just watch prices grind a little lower here.”

With the traditional winter heating season coming to a close soon, the broker said he doesn’t see too much solid footing for bulls. “Why would you be a rush buyer here if there isn’t much time left in the season for bullish threats? Now we’ve worked off the storage overhang, but we are entering the shoulder season. Clearly, nobody is trying to go long right now with the expectation of a three-week rally. That said, we’re not seeing a complete collapse. We’re not going back to the September low of $2.409 unless we get some really bad economic reports coming out.”

Risk managers with clients exposed to downside price risk are holding on to current hedge positions and girding for continued price weakness. Mike DeVooght of DEVO Capital Management, a Colorado-based trading and risk management firm, continues to counsel holding on to a 12-month $5-8 options collar (buying a $5 put and selling an $8 call) that was initiated back in August at a cost of 35 cents. He also suggests holding on to a 12-month $5.50 put option purchased against the sale of a 12-month $7.50 call option that was implemented in December. He suggests that trading accounts and end-users stand aside.

“We are now trading on the bottom of the trading range that has developed for the winter contracts. From a trading perspective, if the spot month contract breaks the $4.500 level, we could see a break similar to last summer. We were trading close to $3 by late spring last year,” DeVooght said.

According to DeVooght’s analysis, the natural gas market is fighting “an uphill battle. Demand is anemic, and there is a lot of gas that can come to the market in a very short period of time.”

Weather bulls no longer have cold-weather momentum on their side. Forecasts call for above-normal temperatures at higher latitudes. Commodity Weather Group in its six-to 10-day outlook shows above- to much-above-normal temperatures north of an arc that includes Montana, Missouri and Virginia. “A more variable pattern appears to be unfolding for March with intermittent cool and warm pushes for many areas of the nation. There is a background pattern type, though, that seems to favor the colder weather more frequently in the South and the warmer weather more frequently across the Great Lakes, Northeast and interior West,” said President Matt Rogers in a morning note to clients.

Market technicians suggest that spot futures are on the verge of testing key technical support levels. “Our key support for spot [futures] from here is $4.630-4.575, down from the $6.108 high and also 0.7862 of the $4.157 to $6.108 rally,” said Walter Zimmerman of United-ICAP.

He added that if April futures break below $4.575, “the minimum downside target becomes the $3.820 area. And if $3.820 fails to hold, then we are talking the $3.200 level.” Bulls are struggling. According to his figures, they “need to get back above $5.585 to revive any hope for an eventual break above the $6.108 high.”

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