In a topsy-turvy session that left both bull and bear searching for answers, natural gas futures slipped lower Thursday as traders took profits following Wednesday’s shocking storage news and resultant 37.4-cent advance. At the closing bell yesterday, the September contract was 10.1 cents lower at $3.367.

After opening higher Thursday, technicians were focused on an unfilled chart gap between September’s $3.72 low on June 22 and its $3.635 high the following day. However, the buyers had spent all their bullets on Wednesday’s rally and once that was apparent yesterday morning, profit-taking took hold. By 11:10 a.m. (EDT) the September contract had tumbled 44 cents off its high for the day to notch a $3.16 low. While profit-taking was undoubtedly the motive behind the sell-off, it was fueled by rumors circulating yesterday that the American Gas Association is going to revise last week’s 3 Bcf injection figure when it announces this week’s supply figures next Wednesday. The AGA, meanwhile, stands behind its unprecedented report (see related story).

Looking ahead, Tim Evans of New York-based IFR Pegasus sees the $3.10-40 trading range from Thursday afternoon as a pivot for Friday’s session. “A break of $3.30 could renew pressure on Thursday’s $3.16 low, with a reversal to the downside through that level threatening a plunge back to the $2.88-92 floor that nearby prices have held since July 20.”

On the upside, a push beyond $3.40 would likely still be met with opposition in the $3.45-50 area ahead of Thursday’s $3.60-62 highs.

Accordingly, Evans suggests the use of sell-stops at $3.28 and $3.14 to scale into a 100% short position basis the September contract. A buy stop at $3.41 will limit his exposure.

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