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Fundamental Rally Gives Analysts Pause
Fueled by forecasts calling for cooler temperatures throughoutmuch of the country later this week, natural gas futures probedhigher in two distinct buying surges yesterday. The first push cameshortly after Monday’s lower open, when traders bid the Januarycontract to $2.50. However, those gains were erased almost entirelyby early afternoon, intra-day profit taking. But the bulls were notfinished, and after digging in their heels at $2.47, weresuccessful in pushing prices through $2.50 late in the session. TheJanuary contract finished up 6.3 at $2.509.
Strength in the physical market was one of the main factorsbehind the early rally, says Ed Kennedy of Miami-based PioneerFutures. “Futures opened weaker, but the [Henry] Hub traded a$2.30-31 and just kept moving up.”
The second wave of buying, however, is somewhat more of amystery, and causes Kennedy to question its authenticity. “Wedidn’t see any real fund buying out there [Monday]. That’s not tosay that we won’t see some [Tuesday], but for right now, theyappear to be on the sidelines.
“I would have felt a little better about this rally had themarket spent some time consolidating in the high $2.30s beforemoving above $2.50. Only two times in nine years has the Januarycontract expired above $2.50. There is still 2.9 Tcf of gas in theground right now. I am loath to expect prices will get much past$2.60 before selling takes over.”
New Mexico-based Kase and Co. takes a more technical view, andups Kennedy’s target high by almost a dime. Based on current chartpatterns, the group looks for prices in the short-term to movehigher and probably hold the upper $2.50s, possibly extending to$2.68. If prices do not stall at $2.53, it is more bullish andwould tend to propel prices with a higher probability to the $2.68level, the group wrote in its report Friday. Monday’s high was$2.525.
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