With Friday’s profit-taking rebound out of the way, traders resumed scouting for lower prices on Monday as August natural gas recorded a low of $6.555 before closing out the day’s regular session at $6.764, down almost a penny from Friday’s close.

While Monday’s $6.555 trade was 2 cents below last Thursday’s $6.575 low, the general price level could prove to be pretty strong support as the August contract has rebounded following both visits. Last Thursday, the contract bounced back to close at $6.655 on the day.

One thing is for sure, Monday’s low penetrated the chart gap created all of the way back from Jan. 18 and 19. After recording a high of $6.380 and closing at $6.324 on Jan. 18, the February futures contract opened Jan. 19 at the day’s low of $6.560 and closed at $6.886. Whether the breach of this gap Monday could lead to still lower price levels remains to be seen.

Borrowing from Kenny Rogers’ hit song “The Gambler,” enerjay LLC broker Jay Levine said in this natural gas futures market you definitely need to “know when to hold ’em, know when to fold ’em, know when to walk away and know when to run. You never count your money when you’re sittin at the table. There’ll be time enough for countin’ when the dealin’s done.”

The broker added that picking a direction in the current market can be a harrowing experience. “The deal is, and this isn’t meant to imply that hedging energy is akin to gambling — trading energy is more like it — but the lyrics to Kenny Rogers’ song are worth remembering while plying the often treacherous waters of these sometimes fickle markets,” Levine said. “Only you can determine the risk tolerance and parameters which make sense — and that’s going to vary considerably from trader to trader and house to house — and as much as we’d all like to incorporate the word in our vocabulary, ‘hoping’ that the market moves in your favor or — and I’ve heard it often enough — a hurricane comes along, isn’t going to cut it. And, since the market is influenced directly and indirectly (and often indiscriminately) by forces beyond our control — and/or imagination — it’s not always easy to determine what’s the right path, or position or trade, to take.”

Levine noted that sometimes the path of least resistance is simply to go with the flow and momentum, while other times it’s worth exploring a countertrend or counterintuitive trade simply because the “ship” is tilting heavily one way. “Other times, and I feel it’s often the best path to take — especially during periods of extreme uncertainty — is no position or trade, under the premise that no position is a position.”

Looking at the overall market equation, the broker noted that the bulls still have a case. “Without significant widespread and sustained heat it becomes more difficult to maintain what are otherwise historically high prices but not impossible,” Levine said. “Fear and fear premiums — of future supply/demand imbalances — are very likely to be around for the foreseeable future (and can resurface at any time) regardless of any near-term or even intermediate-term trend. I’d keep that in mind and under my cap regardless of whether (weather?) you’re bearish or not.”

Looking at the near-term trade, Levine said he sees support lines at $6.605, $6.510 and $6.250, while resistance will likely reside at $6.850, $7, $7.500, $7.950 and $8.750.

Some top traders say the falling natural gas market is simple. “Weather or the lack of any market-moving weather continues to pressure the gas market,” says Mike DeVooght of Devo Capital Management. In addition to moderate conditions in Northeast energy markets, “cooler than normal temperatures in the South and Southeast can really put a damper on natural gas demand,” he said in a note to clients.

DeVooght suggests no change in current positions held by clients. Trading accounts and end-users should stand aside, he said, and producers and physical market longs should continue to hold short an August/October strip at $8 for 25% of production, a summer strip short at $7.600 for 50% of production and a short winter 2007/2008 strip at $9 for 15% of production.

According to AccuWeather much of the South will see cooler temperatures early in the week as welcome rain surfaces across much of the area. “Except for afternoon thunderstorms rumbling over the mountains, Tennessee and North Carolina will have a dry start to the workweek,” says Kristina Baker, AccuWeather meteorologist. She added that most of the rest of the Tennessee Valley and South Carolina will also have drier conditions starting Tuesday, and locations “to the south will stay unsettled with showers and thunderstorms putting a damper on Independence Day festivities.”

The high in Atlanta was forecast to reach 85 degrees Monday but rise to 90 by Thursday. The average high in Atlanta is 89. Jacksonville, FL, was expected to see a high of 86 Monday increasing to 89 by Thursday. The normal high in Jacksonville this time of year is 90.

On the tropical front John Kocet of AccuWeather points out that tropical storms and hurricanes do happen this time of year, but it’s still early in the season. The peak time for hurricanes is August, September and early October. “In order for the atmosphere to birth such storms the trade wind belt must dominate the tropics. Intrusions by the westerlies (the jet stream) spell disaster for any storm that might try to form. The breeding grounds have yet to expand across the central and eastern Atlantic. That happens in August,” he said.

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