Despite warming temperatures across much of the nation andforecasts calling for more of the same, natural gas futuresrebounded yesterday, as traders covered shorts amid heavilyoversold conditions and ahead of potentially “very bullish” storagedata to be released today.

After opening at Monday’s $2.56 high, the March contract rumbled7.7 cents higher to finish at $2.618. For the second day in a rowvolume was light with just 57,919 contracts changing hands.

Many traders were at a loss to explain the price strength in amarket that is expected to see the warmest temperatures of the yearthis week. However, one trader was not surprised by the pricemovement and believes this week’s weather had already been factoredinto prices.

For Ira Hochman of New York-based Trot Trading Corp.,yesterday’s move higher was purely technical and actually had itsroots in Monday’s move lower. Using a sort of “what can’t go downmust go up mentality,” Hochman pointed to March’s ability toactually move higher after gapping lower on the open Monday. “[Themarket] opened lower and you had to be a seller, but when itcouldn’t continue lower you had to know you were wrong. Had weclosed below $2.50 [Monday] it would have been a different story,”he said. Looking ahead, he looks believes prices are building intoa sideways development pattern between $2.48 and $2.78.

While Hochman was looking in the past for clues on pricedirection, New York-based Pegasus Econometric Group was lookingahead. “…the heating degree days for last week ran higher thanforecast and we’re upping our forecast for Wednesday’s AGA reportto 180-200 bcf in net withdrawals. This puts it more clearly into asupportive category relative to the average 150 bcf draw of thepast six years,” he group wrote in its Feb. 15 Natural Gas Report.

In daily technicals Pegasus sees support at $2.46 and resistanceat $2.62.

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