In a surprising show of strength considering the price-bearish fundamental picture, natural gas futures soared to new two-month highs again Monday as fund traders continued their accumulation of long positions. A gap higher open set the stage early yesterday and bears never fully regained control, watching helplessly as November traded to $3.30, its highest level since Aug. 22. The prompt month closed just off that level, up 16.1 cents for the session and 95 cents for the month at $3.202. Estimated volume was typical for an expiration day, with 100,102 contracts changing hands.

Traders said that the late rally was in response to rumors that a large integrated energy marketer was expected to buy large quantities of contracts at or near the close. The November contract peaked at $3.30 at 2 p.m. EST, only to tumble lower for the last 30 minutes of trading.

While many traders believe the market’s impressive rebound during the month of October is a house cards waiting to collapse, there are some analysts that cautiously expect the price advances to continue. Though admitting this is only a correction in an otherwise bear trend, Cynthia Kase, of New Mexico based Kase and Co., does not rule out gains mounting for another few months. Providing that support at $2.83 holds for December, Kase looks for December prices to surpass resistance at $3.37 en route to a split target at $3.47-53.

“Our guess is that the market still views supply demand factors as negative in the longer run, but thinks that the shorter-term factors could be bullish and so is unsure as to how to act. Likely, we will see prices oscillate as passing random events drive price. The market, for now is keeping its options open.”

Ed Kennedy of Pioneer Futures in Miami agrees and also targets the $3.37 level as key. For him, the $3.37 level is important because it represents 1.382 Fibonacci retracement extensions off December’s move from its low at $2.531 to $3.14. “If the market settles above $3.40, look out,” he warns.

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