Natural gas futures bulls made another assault on resistance at $4.500 but received the same response as on Monday as the January contract was unable to settle above the important price level. The prompt-month contract ended up closing at $4.393, down 9.5 cents from Monday's close.
After reaching a high of $4.540 on Monday, January futures reached $4.545 on Tuesday but still failed to hold on to a close above $4.500, which some traders target as an important pivot point for futures. The last time futures traded higher than Tuesday was almost four months ago back on Aug. 9, when the September contract reached a high of $4.548.
"A lot of traders going off of technical analysis hold $4.50 in high regards. Some believe a decisive close above that resistance level could open the door to $5 or a test of $5.250," said a New York broker. "However, with the fundamentals we currently have, including plenty of gas in storage and an economy that still isn't thriving, I'm not sure that any breach of $5 would stick around very long at all. Unless winter cold beats all expectations, I don't think any breakout above $5 will have much staying power."
Accounting for the recent hike in values, some analysts see a tag team of short-covering and unexpected cold lifting the market. "This market is also edging higher [Tuesday morning] but is also encountering staunch resistance at [Monday's] highs. We look for these highs to be taken out by [Wednesday] in the process of igniting some additional fund short-covering," said Jim Ritterbusch of Ritterbusch and Associates. "This ongoing advance to four-month highs per nearest weekly futures is easily explainable by a broad-based snap of cold temperatures that is proving much more pronounced and extended than widely perceived at the start of last week. The cold patterns that cover roughly the eastern half of the U.S. are expected to persist beyond next week."
Directional natural gas futures traders abandoned long positions and increased short exposure for the abbreviated trading week ended Nov. 30, according to data submitted to the Commodity Futures Trading Commission. In its Commitments of Traders report it disclosed that at IntercontinentalExchange (ICE) long futures and options (2,500 MMBtu per contract) held by managed money fell by 3,625 to 214,767, and short futures and options plunged by 41,439 to 55,855. At the New York Mercantile Exchange, long contracts (10,000 MMBtu per contract) fell by 5,984 to 135,740 and short futures and options rose by a hefty 16,609 to 204,533. When adjusted for contract size, long positions at both exchanges fell by 6,890 and shorts rose by 6,249. For the trading period ended Nov. 30 January futures fell 23.5 cents to $4.180.
©Copyright 2010 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.