July natural gas futures continued lower on Wednesday, bringing the down-day streak to three and the cumulative loss to 52.7 cents during that period. The prompt month reached a low of $7.350 before closing out the day's regular session at $7.391, down 12.8 cents from Tuesday.

Borrowing a Japanese trading term, a Washington, DC-based broker said the last three days of trading resembled "three black crows descending out of the sky" on the chart. With the July contract coming close to bumping up against some pretty strong support lines, some traders -- more than aware of the recent trading pattern -- were preparing for the tides to turn once again, resulting in another $8 run.

"Before we have another rebound, I think we might make a pit stop down to $7.250," the broker said. "Our technical model has been short. In fact, if we didn't have that rally back during the end of May, we would have been short from $7.900. As for Wednesday's action, once we got through $7.500, it opened the door wide for a test of $7.250. While there was some buying that came in at the end of the day, I attribute that to people taking profit following three straight days of a downdraft. Now, I expect to see a pause day or a little bit of retracement before one final assault down towards $7.250."

The broker said the $7.250 test has a pretty good chance of coming true as temperatures moderate across much of the country. "After the past two to three days of muggy humid conditions, we are getting back to some cool air. Some weather forecasts out there are calling for temperatures in the high 60s to low 70s for the Midcontinent, possibly rolling eastward over the next week or so," he said. "We have no real weather out there to speak of and storage injections, while anticipated to be under 100 Bcf, are still expected to be significant."

He said he is expecting an injection between 81 Bcf and 91 Bcf when the Energy Information Administration (EIA) reveals the storage report for the week ended June 15 on Thursday morning. "While the number will not be as big as the last couple of weeks, it also doesn't classify as 'nothing' either."

While traders are more than aware of the market's vulnerability to upside surprises, some market technicians are wary of any advance in natural gas futures prices. Once a long-term support line extending from the March 19 low of $6.820 posted by the April contract to the recent $7.590 low of June 13 was broken, the technical failure could bring lower prices.

"Our bearish case has been that natural gas would crack like an egg on a decisive break below the rising wedge support line," said Walter Zimmerman of United Energy. Should that occur, he believes spot futures should fall at least to $6.185 using his wave analysis methodology.

Zimmerman also notes that if the bulls are to stave off a technical collapse, the market must "reverse sharply higher by the $7.355-7.280 zone. Given the pace of this descent the 'reverse higher or else time' for the bulls is fast approaching. Even the neutral case for a continued $7.500 to $8.200 trading range is at risk here," he said.

Others see a bull market run higher just around the corner. "Traders have been waiting for an event that will run the market (presumably) higher. You would think higher, but it's really difficult to say," said a Denver trader and marketer.

He added that he was surprised that the market is as high as it is given the lack of bullish news, and "the fact that the bulls have been able to hold the market at these prices is pretty impressive, which makes it worrisome that if there ever were a news story and a reason to run the market higher, then what happens? The market would be at $8.50 pretty quickly if something comes out. Any storm that starts making a movement to the Gulf should do it," he suggested.

Turning more focus on Thursday's storage report, the number unveiled will be compared to last year's 79 Bcf build and the five-year average injection of 89 Bcf. Siding with the five-year average, a Reuters survey of 22 estimates produced an average expectation of an 89 Bcf build.

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