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Range-Bound Trade Keeps Bulls and Bears Guessing

Range-Bound Trade Keeps Bulls and Bears Guessing

For the third session in a row, natural gas futures see-sawed to either side of unchanged yesterday as traders eschewed either buying or selling the market outside of its recent trading range. After etching out a $2.34 low Tuesday morning, speculative buying was once again seen trying to push the July contract through resistance at $2.40. But resistance held and the contract sank back to finish at $2.367, a 0.5-cent decline on the day.

A Chicago area trader said fund groups were active on both buying and selling fronts yesterday. "It seems like the market has found a nice little trading range and there were people out there buying the low $2.30s and selling the high $2.30s." Looking ahead, he feels that the market will have a hard time maintaining this lofty height amid mild weather and bearish storage injections. "Market expectations call for an injection of 70-80 Bcf [today], but I look for an 85 Bcf build. Despite above-normal temperatures last week, there continued to be an economic incentive to sock gas away in the ground." And that spread still exists, he continued. "The [Henry] Hub traded at a 8 cent discount to futures for much of the day today. Why wouldn't you take advantage of storage?"

New York-based Pegasus Econometric Group, on the other hand, looks for a 90-110 Bcf injection to be a disappointment to bulls who were looking for a lower and therefore more supportive number following last week's early Northeast heat.

In daily technicals support exists at Friday's $2.325 low, Pegasus said. Strong resistance at $2.47-48 will likely repel the market, if the psychological $2.40 barrier is broken.

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