An adventure north of $4 appeared to be a bridge too far — at least on Friday — as the October contract grabbed the $4 handle two separate times during the day before closing at $3.985, up three pennies from Thursday’s close and up 20.7 cents from the previous week’s finish.

After reaching a high of $4.035 in pre-regular session trading on Friday, the prompt-month contract put in a $3.796 low at 11:20 a.m. EDT before running back up to $4.006 just before closing out the session. The last time a front-month contract traded higher than Friday was more than seven weeks ago when the September contract recorded a $4.075 high on Aug. 6.

Some traders were not surprised that the $4 price area offered up some resistance. “Looking at the Market Profile, we entered the 100% level of the weekly breakout at the $4.020 price level, which is where we encountered some resistance on Friday,” said Julio Sera, a broker with Hencorp Becstone Futures LC. “The impending expiration of the October contract created a lot of ‘trade at settlement’ transactions. People were getting out of positions or doing their final hedging ahead of Monday’s expiration.”

Sera reiterated that while the bottom is in, that does not mean values are off to the races from here. “The $2.409 low from Sept. 4 is in as the floor, but the real question is how do you play this market going forward. There is definitely a lot more risk to the upside than the downside, and I think this market’s moves will be greatly dictated by the severity of the winter and on when a rebound in U.S. consumption occurs.”

Just because the bottom is in, the broker said, traders should not be looking at the sky. “I don’t think we are going to see a pure vertical move from here. We’ll likely get a pullback or consolidation here or there,” he said. “We’ve been so low for so long, what really is going to be the catalyst for a breakout higher? I believe we’ve got some time here before something like that comes around.”

Some traders suggest that additional fund short-covering and technical strength will prevail in the short run. “By and large, this market still appears well supported and has the potential of providing additional surprises on the upside, especially since the funds will be looking for additional reasons to accept profits from long-standing short positions ahead of month’s end,” said Jim Ritterbusch of Ritterbusch and Associates. He admitted that constructing “a strong fundamental case for higher prices is a challenging exercise in view of record supply levels; we feel that technical factors will rule near term and that additional upside follow-through is possible going into Monday’s expiration of the October contract.”

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