After maintaining and even building on Monday’s gains, natural gas futures traders on Tuesday were becoming more comfortable with labeling last week’s $6.450 a “bottom.” April natural gas on Tuesday put in a high of $7.22 before settling at $7.167, up 16 cents on the day and 52.1 cents for the week.

Natural gas futures on Tuesday were again buoyed by the continued strong performance of the petroleum futures complex. April crude climbed $1.33 to close at $63.10/bbl, while April heating oil and April unleaded gasoline increased 8.34 cents and 12.27 cents, respectively, to settle at $1.8212/gallon and $1.8660/gallon.

Top market technicians have been anticipating the beginning of a seasonal rally that could take prices significantly higher. Those same technicians are saying that the time is now. Prior to Tuesday’s session, Walter Zimmerman of United Energy said a modest close higher Tuesday would signal the end of the bear market, which has carved more than 50% off natural gas futures from the $15.780 post-Katrina high reached Dec. 13, 2005.

“In wave count terms a decisive close above $7.075 will be sufficient to confirm $6.450 as the conclusion of the entire five-wave decline from the $15.780 high and the start of this year’s preseason rally,” he said.

Zimmerman and other market technicians use a methodology known as Elliott Wave analysis to make predictions about the market’s future direction. The analysis consists of a five wave model, and if Zimmerman’s conclusion is correct, the market is ready to advance in a five wave pattern consisting of three waves, or moves, in the dominant direction (up) punctuated by reversals. Waves 1, 3, and 5 are upward and waves 2 and 4 are down.

“Monday’s rally formed a bottom on the daily chart,” he said. “If natgas can just hold Monday’s gains into Friday it will be enough to confirm last week’s (technical) bottom.” He added that the average preseason rally, for all rallies that began after February, is a 28% increase in spot contract value. “The $6.450 low plus 28% would target a $8.260 area peak. The 15-year average preseason rally is a 54% increase in value. The $6.450 low plus 54% would target $9.930,” he pointed out.

Jay Levine, a broker with enerjay LLC, said Tuesday’s action showed solid follow-through gains from Monday’s session, which will likely be met with resistance similar to that experienced by two attempted rallies in February.

“Undoubtedly this rally will bring out the sellers in anticipation of it being yet one more rally which fails, but [the] only caution being I’m still looking for (much) higher petroleum prices, and natural gas is looking more like a market [that] has found pay-dirt…if not a bottom,” Levine said. “It’s still too early to sound the all-clear bell, but the more crude, et al, gathers strength — and overall I still see them higher — the better the chances the bottom in [natural gas] is for real and people recognize that natural gas could be considered cheap.”

Levine said with April natural gas testing and holding the $7 area on Tuesday, the market could see additional strength this week. He views the $7.25-7.30 area as initial resistance, followed by the $7.75-7.85 area. However, he said he is starting to think $8.25 becomes “much more realistic…even if it doesn’t look it now, followed by something closer to $9, then $10 if not $10.50.” On the downside, Levine allowed that a failure to hold $7 suggests support then falls back to $6.80, if not $6.70, then something down in the $6.40-6.30 area.

IFR Energy Services analyst Tim Evans agreed that holding support around the psychological $7 mark was very important for bulls. “Natural gas has closed its minor price gap from Feb. 27, but also held minor support at $6.95 to maintain a bullish tone,” he said. “This keeps the upside open.”

Even if winter is almost over, the short-term weather outlook also looks supportive. The National Weather Service in its latest six-to-10-day forecast covering March 20-24 shows below normal temperatures for a vast majority of the country. South Texas, Florida and the southern portions of Georgia, Alabama, Mississippi and Louisiana are expected to exhibit normal temperatures for this time of year, as will Maine and northern Wisconsin. Southern California, Nevada, Washington and parts of Idaho will also experience normal temperatures, while Northern California and Oregon will see above normal readings.

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