Although still very much intact, the uptrend which has carriedprices higher for much of the year suffered a defeat yesterday, astraders liquidated positions on the open to create a potentiallybearish technical scenario. The January contract took the sell-offsquarely on the chin, tumbling $1.00 lower to evoke a lock-limitdown trading halt at about 10:15 a.m. (ET) Tuesday. Afterre-opening 15 minutes later with new two-dollar limits in eitherdirection, the market continued lower to finish at $8.145, down$1.268 for the session.

After gapping higher, and pressing to new commodity highsMonday, the January contract gapped lower Tuesday to create whattechnicians commonly refer to as an island reversal pattern. Andwhile market watchers have said for some time that it would be amove just like this that would signal a possible reversal of theup-trend, few were willing to endorse the downside fully Tuesday.

“The $8.10-$7.73 level should be good suppport so that’s thearea I would look to buy around. Now we will sell rallies until wecan rotate up above $8.70.. if we do [rotate above $8.70], we couldthen buy a dip looking to retrace, or continue the move up,” saidIra Hochman, a consultant to several key Nymex locals.

Hochman, who started calling for a move lower when Januarystalled in the $9.60 area Monday night and then developed below$9.43-48, utilizes a technical system called Market Profile, whichattempts to derive the market’s fair value, based on an analysis oftime spent at various price levels.

Similarly, Susannah Hardesty of Indiana-based Energy Researchand Trading was unwilling to throw in the towel on the bull-run.”Given the extended weather forecasts for below normal to muchbelow normal temperatures through most of the country throughChristmas, I have concluded that [Tuesday] morning’s massive dropis [just] a part of the high volatility in these excessively highprices… There is massive support below the market at $7.95-96,which forms a gap in the chart,” she wrote in her special intra-dayNatural Gas Report.

Looking ahead however, technicals will take a sideline, at leastfor a minute this afternoon when fresh storage data is released.Market estimates are calling for the withdrawal to be between 140and 170 Bcf, compared with the 73 Bcf withdrawals seen both lastweek and last year at this time. Also expected to be eclipsed isAGA’s five-year average takeaway of 69 Bcf.

The New York Mercantile Exchange will raise the margins on itsHenry Hub natural gas contract at the close of business today to$14,000 from $12,000 for clearing members; to $15,400 from $13,200for members; and to $18,900 from $16,200 for customers.

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