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Small Gain Puts Bulls Back at Helm

Small Gain Puts Bulls Back at Helm

Feeding off strength from Tuesday's Access session gains, the May contract was fast out of the chute Wednesday, quickly notching a $2.08 shortly before noon. But for the fourth time in the last five trading days, resistance at the $2.07-09 level held and profit-taking in the form of selling became the theme of the afternoon. The May contract finished at $2.024, just 1.1 cents more than Tuesday's close.

Traders agreed the market continues to be technically driven as evidenced by the low end of yesterday's range, which was etched in the last hour of trading. "This market has come off its high and now looks poised to punch through the $2.00 level for a retest of the $1.99," a Chicago trader predicted yesterday afternoon. His words were prophetic because shortly after that the $1.99 level was tested but held as the low for the day.

Although many traders looked past fundamental features in the open outcry session yesterday, few were able to ignore the impact of a 2 Bcf storage injection for last week estimated by the American Gas Association. Pre-report speculation generally centered on a small net withdrawal; however, one industry report straddled the fence by calling for either a small injection or withdrawal. Tom Saal of Miami-based Pioneer Futures was somewhat surprised by the net refill for the week, but maintains that the next week's report will be more critical because it will be the first full week of injections.

Until that time, Saal feels it is more appropriate to look at what the market didn't do. "We tested support below $2.00 again today but there was no follow-through selling. Now the market is positioned to test the upside again." He thinks the first test will come at Wednesday's high of $2.08, which will be little more than a speed bump to traders looking to fill the $2.11-19 chart gap on the continuation chart dating back to November. The vehicle for this rally? "Aggressive buying above the market by fund groups, who are already long," Saal said.

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