After careening almost $1.50 lower early last week, bulls atNymex fought back Thursday and Friday as traders glommed on to somemodestly constructive technical and fundamental factors. When allthe dust had cleared and the orders were tabulated, the numbersspeak for themselves. The February contract lost 13% of its value,tumbling 96.3 cents lower, to go off the board at $6.293 Monday.After following in February’s footsteps Tuesday and Wednesday, thenew prompt month, March, erupted $1.036 higher to close the week at$6.743.

While sources differed in their explanation of the two-day, 15%price spike, they were unanimous in their disbelief. “I was lookingfor a short-covering rally, but I never would have dreamed that wewould be back up near the $7.00 level,” a cash trader said.”Weather is relatively a non-factor. Sure it will be a littlechilly this weekend, but it’s February.”

A quick blast of arctic air, packing high winds, was expected toinvade portions of the Midwest and Northeast over the weekend,sending wind chills to either side of 0 degrees Fahrenheit. Cashprices reacted accordingly, gaining 70 cents or more at mosttrading points Friday. Daily GPI’s Henry Hub index for weekenddelivery gained 71 cents to $6.56.

However, old man winter is not solely responsible for Friday’srally. Also of influence was technical short-covering and freshbuying, as March passed through some key price levels. Afternotching a $6.42 high on Thursday, all eyes were on the $6.47 to$6.66 chart gap created by last Monday’s lower open. After brieflytrading up above and then back below, that area Friday morning, themarket made it stick on its second attempt. From 11:10 to 11:20a.m. (EST) Friday, the March contract moved decisively from $6.47to $6.73. From that point forward the market never got below $6.70.

Looking ahead, New York-based IFR Pegasus is skeptical of lastweek’s rally which they feel came on an essentially unchangedfundamental outlook. “Storage withdrawals are still lagging waybehind this period a year ago. The draw based on [last] week’sweather may be in the 90-100 Bcf range, even with a colder [Friday]in the Midwest, falling short of the 213 drop recorded a year ago,”the group wrote in its daily report Friday.

Since it was technicals that were at least partially responsiblefor the precipitous rise, its is probably worth taking a look atsome other meaningful technical levels. A possible upside objectiveis the $7.02-06 chart gap created by a lower open back on Jan. 23.Higher still is the $7.58-65 gap from Jan. 17. Support is seen at$6.375 and then again at $5.76.

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