True to form, Wednesday in the natural gas pit at Nymex had itsshare of price volatility as traders factored the latest storagedata into the market. After a relatively quiet morning, the Octobercontract exploded higher to $5.38 and then tumbled lower to $5.26between 2:00 and 2:10 p.m. As it turned out, the prices produced inthat small trading window held as the prompt month’s daily range.October finished at $5.318, down 4.5 cents for the session.

According to the American Gas Association, 67 Bcf was added tounderground storage facilities, bringing stocks up to 2,325 Bcf or71% full. Last year the market injected 78 Bcf into the ground andboth the 5-year average and last week’s report showed a 72 Bcfrefill.

However, despite the fact the storage injection fell short ofhistorical comparisons, traders were quick to classify the reportneutral, mainly because it fell within the 60-70 Bcf range ofexpectations.

And while the storage report was not a surprise, the market’sreaction was. “The market spiked up but couldn’t set a new high,”said technician Ira Hochman of New York-based Trot Trading Corp.”With all the bullishness that’s out there, I figured it wouldn’thave been too difficult to get past [Tuesday’s] $5.385 high.”

By trading inside Tuesday’s price range, October completed aninside, or neutral, day on the daily charts, and for Hochman thatcreates some uncertainty Thursday. If we open lower, we could see alittle bit more of a downside correction as traders test thedownside.” In order for the market to move higher, he continued,October needs to open and hold above Wednesday’s $5.318 close thismorning. Alternatively, the only thing that would turn him bearishwould be a breakout reversal characterized by a move to new highsand followed by a flush below $5.26.

However, New York-based Pegasus Group is wary of the currentprice level and questions the market’s ability to hold. “In short,the market is rising because traders are buying, and they arebuying because it is going up. This upward feedback spiral is goodas long as it lasts, but we fear that it is lifting the price to alevel that is unsustainable over the intermediate term and thatthere is danger of a significant downward correction in price, evenwithout a bearish fundamental surprise to trigger the reversal,”the group wrote in its daily NatGas Report.

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