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Bulls, Bears Call it a Draw in Quiet Session

Bulls, Bears Call it a Draw in Quiet Session

After a hectic trading week that saw the June contract trade within a choppy, 15-cent range, traders tiptoed through Friday's natural gas session. A late rally and retreat right before the close of trading was the only real excitement in an otherwise featureless trading landscape. The June contract finished at $2.288, up 0.6 cents for the day and 1.5 cents for the week.

Although some traders argue that prices are in a consolidation phase after topping out at $2.405, Susannah Hardesty of Energy Research and Trading believes the market still has upside potential. Her forecast, which is based on a series of spring and fall highs and summer and winter lows, calls for the prompt futures contract to make a spring high between now and June 25th, on a move between $2.60 and $2.90. Factors consistent with her prediction are storage injections below last year, above normal projected temperatures for most of the country, continued aggressive speculative fund buying and a large commercial short position, Hardesty said.

A Houston marketer agreed commercial traders have hedged themselves and will be looking to buy back the June contract during its last three trading days. However, he thinks that will be offset, at least partially, by speculative accounts which will be rolling out of June positions in favor of July. "The net result will be a widening of the June-July spread into expiration," he added.

He also remains bullish, although more cautiously so than Hardesty, citing false breakouts both above and below the recent $2.20-30 trading range. "Monday we broke above $2.30 only to have prices move lower Tuesday. Then after a move below $2.20 could not be sustained Wednesday and Thursday, we are back near the top of the $2.20-30 range." However, he believes the next move will be inspired by a fundamental phenomenon rather than a technical one. "This market will have a fair amount of gas off the market out West between the outages on El Paso and at Opal next week. Plus, the entire hydrocarbon complex has been very strong lately. Natural [gas] could see sympathy buying if crude and related products continue to trend higher," he reasoned.

In daily technicals June finds support at 2.05 and 2.15, which correspond with 50% and 38% fibonacci retracement levels respectively. Congestion also exists at the $2.17 double bottom, a chartist advised. On the upside, resistance lines up at prior highs of $2.315 and $2.405, he said.

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