“Close, but no cigar” might as well have been the motto for thenatural gas futures market last week. It was a week in whichtraders pushed both May and June contracts to the limits of supportand resistance, only to have prices whip-saw back in their face. Bythe time all the dust had settled and the orders tabulated in thedata room at Nymex, the evidence was irrefutable. Natural gas isonce again stuck in a trading or consolidation range, bounded onone side by previous highs at $3.195 and on the other by a seriesof technical and fundamental hurdles between $2.90 and $3.00. TheMay contract went off the board in rather unspectacular fashionWednesday, settling at $3.089. Buoyed by heavy fund and localbuying Friday, the June contract retraced three straight days oflosses by closing up 8.6 cents at $3.141.

For many traders, last week’s market was better characterized bywhat it didn’t do rather than what it did do. After slipping lowerand trading within an extremely-tight 3.5-cent range Thursday, theJune contract sat perched just above a key chart gap from the dailycontinuation chart at $3.03-045.

Many traders believed this presented a make-or-break situationFriday – prices could move lower and fill in the gap or reboundhigher in a technical rally. However, bears never really got achance Friday. After opening at $3.06, a wave of fund buying(rumored to be on the order of 4,000-5,000 contracts) entered themarket and quickly delivered the prompt month a dime higher in thefirst hour of trading. Locals jumped aboard the rally, but wereultimately unsuccessful in pushing prices past heavy trade sellingseen Friday in the upper teens.

Looking ahead, observers are mixed as to whether prices cancontinue higher and break through stubborn resistance in the $3.20area. “The key will be cash prices Monday, Tuesday and Wednesday,”said Ed Kennedy of Miami-based Pioneer Futures. “Marketers havegone long the last four months and it has paid off. It will beinteresting to see if they are long again.” However, regardless ofwhether marketers have elected to enter May long or short, Kennedycautions that demand can really trail off with neither hot nor coldtemperatures prevalent across the country.

On the other hand George Leide, a broker with New York-basedRafferty Energy Group, takes a much more technical approach to themarket and believes natural gas has stair-stepped its way to higherprices. By looking at a daily continuation chart, Leide identifiesperiods of range-bound trading interspersed with quick break outsto the upside that have delivered prices to their current levels.Because of that, he does not rule out a break above $3.20. “If weget a settlement above $3.20, watch out. There is not much up thereuntil you get to the $3.50-55 area.” However, he is quick to temperthat view and points to the 12-month strip, which at $3.141 isalmost 30 cents above the entire 1999 calendar year high of $2.86.

In daily technicals, Leide targets support at $2.969, whichcorresponds to trend line support from the daily continuationchart. Also of note is the 40-day moving average, which comes injust a penny and a half lower at $2.953 Friday. Resistance is seenat prior highs in the $3.19-20 area.

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