Following a four-day period where natural gas futures rallied 10%, traders elected to play it safe Friday ahead of the weekend. Sensing technical support overhead, bulls were not in the buying mood. Bears meanwhile were also quiet, still licking their wounds from the bear trap that resulted in a 43-cent rally last Monday. The June contract finished at $5.806, up 3.4 cents for the session and 55.1 cents higher for the week.

Although cash prices moved higher Friday, sources said they did so only to play catch-up with the 11.2-cent rally experienced by the futures market Thursday. After a negative open Thursday, the June contract erupted higher at midday following the news that a lower-than-expected 80 Bcf had been injected into underground storage facilities last week. At 821 Bcf, Storage is now 824 Bcf less than last year at this time, 545 Bcf below the five-year average and roughly 25% of the estimated full capacity of 3,200 Bcf.

Some market-watchers were surprised the June futures contract could not even muster the buying needed for a push toward major support seen at the $5.91 level. Instead, the contract managed only a $5.83 high and notched an inside-day on the daily bar charts. In the absence of much leadership from fund or commercial traders, the market shifted mostly sideways Friday as local traders picked each other’s pockets. Estimated volume was light, with only 67,195 contracts changing hands.

Looking ahead, Ed Kennedy of Commercial Brokerage Corp. in Miami, believes the $5.70s and $5.80s might be good areas to initiate shorts. However, he is quick to advise his customers to cover that position should the market settle above the April 21 continuation chart high of $5.91.

On the downside, Craig Coberly points to the $5.59 level as key. “As things stand now, trading below $5.59 will be the first high probability signal that the rally is complete,” he wrote in a note to customers Friday. “A daily close below $5.58 will be more than 8 cents below the [lower] Gann support line [and will be] evidence that a top has been made.”

Devised by William D. Gann who was reputed to have made 50 million dollars over the course of his career trading grains near the turn of the 20th Century, Gann lines are similar to common trendlines used by traders every day. While both trendlines and Gann lines are drawn off the market’s recent high or low, Gann lines assume the slope of an integer — typically one or two cents — whereas trendlines’ slope do not have to be an integer and are dictated by subsequent market lows or highs. For Coberly, the Gann line in question is drawn off the $5.22 low etched May 2 on the on the 68-minute June chart.

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