Traders really summed up the indecisiveness of market sentiment on Tuesday as they pushed the May natural gas futures contract to a high of $7.690 and a low of $7.490 before settling almost smack dab in the middle at $7.598, up 3.6 cents on the day. The day's action also showed just how fickle the crude/natural gas futures relationship can be as crude plummeted, giving back almost all of its gains from Monday.

"May started the regular session higher, dropped lower and settled just a few cents higher than Monday's close, so it wasn't too decisive in any way, shape or form," said a Washington, DC-based broker. "Sure, they headed in the same direction Monday, but oil on Tuesday gave back all of its gains, so you can't really say that the link between crude and natural gas has been all that dramatic.

"I am not a huge believer in the relationship. Sure, if there is a monster move in oil, yes it will tug all energy around in whatever direction it is moving. There have also been times when there were monster moves in natural gas that have affected petroleum. However, there are different fundamentals going on right now. While they might be following similar general patterns, there are a lot of differences to be found."

Looking at natural gas price direction over the last month, the broker called it "typical lackluster shoulder-month" trading. "For every bullish argument I have heard, I have found a similar number of bearish arguments. I think we are continuing to see choppy trading. Quite frankly, anything happening between $7 and $8 doesn't get me going."

During choppy periods of trade, the broker said a few strategies can help depending on what the trader's goal is. "Commercial traders can install a set discipline. If the belief is that we are in a price band between $7 and $8, then commercials would probably be looking to picking some supply off down in the lower $7s. The seasonal outlook is that we will probably move higher from some sort of base, but the question is where exactly is that base. We won't know it until afterwards when we look back and say 'there was the last low and the beginning of the move.'

"Anyone who is disciplined to buy in the bottom third of the range is probably serving themselves well. These are people who are in the business taking their best guess. These are not wild-eyed speculators; these are people who are looking to find the best opportunity to get a good price. When it comes down and you hold out because you expect it might go even lower and instead it ends up rebounding, well, you've missed your chance. If you ignore your trading parameters on when to buy, that is where you hurt your chance at creating a nice blended average."

The broker noted that speculators in the current market would likely sell out of the money calls and puts on either side of the band. "I would not be a huge supporter of that right now because I think we are moving towards the end of the shoulder season, so you are not necessarily getting compensated for taking that risk if the market goes in one way or the other," he said.

Monday's May contract surge of 18.1 cents to $7.562 caught a few traders off guard. "The market caught a few traders short who were expecting it to test down to $7.15, and when they couldn't lean on it any more, strength in crude and products was enough to push prices higher," said a New York floor trader.

"I don't see anything drastic happening the next couple of days, and I expect prices to linger around $7.50 until the May contract expires on Thursday," he said. He added that options expiration on Wednesday might see activity designed to either attack or defend the $7.50 strike price. "It was a good move [Monday], and I don't see anything moving prices much more," he said. Natural gas options expire Wednesday, and sellers of May $7.50 call options will try to ensure that May futures expire below $7.50 while the reverse will be true for sellers of the $7.50 put options. As of Monday's settlement, open interest in the $7.50 call options stood at 2,267 contracts and in the $7.50 put options at 2,593 contracts.

During the course of the day Monday prominent floor trader Sandy "Trot" Goldfarb was a noted buyer. He indicated he thought the market had put in a bottom, according to instant messages received from the floor.

Longer-term traders have a bullish outlook. Jim Ritterbusch of Ritterbusch and Associates says his supportive price outlook is based on the likelihood that the storage surplus against average levels will contract marginally as the spring/summer proceeds because of a strong pace of industrial and electrical generation demand caused by continued favorable economic conditions. Market surprises are expected to favor the bulls. "Meanwhile, we feel that little risk premium has been priced into summer/fall futures to account for occasional nuclear outages, an early hurricane season or an unusually hot start to the late spring/early summer period," he said.

Phil Flynn of Alaron is ready to go. On Monday morning, he recommended buying June natural gas at $7.23 with a stop at $7.10. June futures settled at $7.687 on Monday and $7.708 on Tuesday.

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