With few fresh fundamental factors on which to trade, natural gas futures prices chopped lower Tuesday in agreement with increasingly bearish technical factors. The May contract was hardest hit by the selling, dipping 6.8 cents to close at $5.645. After two days of quiet trading, activity picked up on Tuesday and added credence to the down move. Estimated volume was 67,340.

Last week the market rose steadily throughout the week, only to fizzle when the apparently bullish storage report (featuring a 48 Bcf withdrawal) was released Thursday. With a potentially bearish storage report expected this Thursday, is it possible the market is doing the reverse and pricing in the report a few days early, traders opined.

And just like last week when withdrawal estimates increased as Thursday drew near, this week has seen injection predictions increase. On Monday Citigroup analyst Kyle Cooper called for an estimated build of 41 to 51 Bcf. Then Tuesday, Thomas Driscoll of Lehman Brothers and Tim Evans of IFR Pegasus in New York upped the ante by calling for refills in the 50-60 Bcf range. A year ago the market injected 69 Bcf and the five-year injection for last week has averaged 36 Bcf. Driven by back-to-back weekly storage withdrawals, U.S. underground stocks currently stand at just 623 Bcf, which is a record low and is nearly 50% less than the five-year average for this time of year.

With fundamental traders taking a wait-and-see approach, technicians were busy recalibrating their charts Tuesday. After failing to match Thursday’s $5.83 high on Monday, several technical systems sent out sell signals Monday and Tuesday. Specifically, Tom Saal of Commercial Brokerage Corp. in Miami noted May’s $5.645 close, which ducked beneath the 38.2% Fibonacci retracement from the February high to the April low at $5.649.

Similarly, Evans sees a break of $5.62, basis the May contract, paving the way for follow-through down to the $5.49-495 pivot from April 10 and April 16. “At this point we think the $5.035-5.04 lows of April 8-9 and $4.865 bottom from April 4 are likely beyond the market’s reach, although benign weather and weaker cash prices could cause May some trouble ahead of next week’s expiration,” he wrote in a note to customers Tuesday. Accordingly, Evans looks to use a $5.58 sell stop to initiate a 50% short position in May futures. A $5.74 buy stop would limit his risk.

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