Amid a steady stream of non-commercial selling, natural gasfutures tumbled lower yesterday morning, renewing fears that themarket may not have reached a bottom and further losses arepossible. Plunging to its lowest level in more than three months,the April contract took the selling on the chin yesterday, falling15.7 cents to close at $5.006. Volume at Nymex was healthy with anestimated 56,626 contracts changing hands.

For local technician Ira Hochman, yesterday’s price decline wasimminent since last Thursday, when buyers were unsuccessfulpromoting April futures to a new high. The selling that followedpushed the market down to close for the day at $5.285. April thenproceeded to gap lower on Friday morning, Hochman continued.

For Ed Kennedy of Miami-based Pioneer Futures, the most notablefeature of yesterday’s price action was the reemergence ofspeculative funds, who entered the market on the sell-sideyesterday. “We saw two distinct waves of fund selling. First,during the morning on a move that produced yesterday’s $4.93 lowand then again in the afternoon,” he said. In between those twobear moves, Kennedy witnessed moderate short-covering by localtraders who had participated in the early run lower.

Looking ahead, he admits that after consolidating within a60-cent price range for a month now, the move either up or down,when it occurs, is likely be substantial. Accordingly, he adviseshis clients to buy an April call at $5.45 while simultaneouslybuying an April put at $4.95. Because volatility is relatively lowright now, these options can be had at a bargain. And when themarket moves to one side or the other, you benefit by thevolatility, he reasoned.

With new storage data set to be released this afternoon, bettingon volatility might not be such a bad idea. Estimates for thereport center on a 60-100 Bcf withdrawal compared to a 31 Bcf drawa year ago and a 73 Bcf draw last week. Kennedy targets the upperend of the market consensus as he looks for 87 Bcf.

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