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Short-Covering Boosts Futures, Bulls Confidence

Short-Covering Boosts Futures, Bulls Confidence

Natural gas futures made it three in a row yesterday when a combination of commercial short covering and local buy-stop hunting boosted the contract to its highest level since last week. In doing so, the prompt contract was able to fill in a chart gap created between Friday's $2.283 low and Monday's $2.26 high. July finished at $2.295, up 3.1 on the day.

Traders were surprised by the market's ability to move higher in the face of neutral fundamental factors and bearish technicals. The July contract has been in a reversal since notching a $2.48 high on June 7. However, a California trader feels bulls can glean something positive from a market "that has made higher highs and higher lows" each day since Monday.

"Relatively quiet," is how Tom Saal of Miami-based Pioneer Futures viewed trading on Thursday. However, he admitted that activity picked up once trade buying was able to poke through the $2.285 level. Looking ahead, Saal believes this market is very balanced right now. "We might trend slightly higher or lower into Monday's expiration, but I do not expect the market will make a major move until after July is off the board," he said.

For what its worth, natural gas futures have posted gains each of the last six Fridays.

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