Boosted by scaled-down buying support, the natural gas futures market rebounded from lows notched Monday morning. However, that buying was muted by a continued negative technical and fundamental outlook, and as a result the market finished in negative territory for the day. The November contract experienced the largest trading range Monday, as the prompt month rebounded to a $2.41 high after dipping down to $2.33 earlier in the session. It closed with a 5.2-cent loss to $2.378. By comparison, the rest of the winter strip was hit harder, led by December, which tumbled 6.5 cents to $2.66.

Pointing to the 5-cent decline and lower high and lower low notched on the daily chart, Nymex bears were quick to claim the session as a victory. However, all hope was not abandoned for bulls traders, who were pleased by November’s ability to rally back and close above Friday’s low at $2.37. They also note that by finishing in the top half of its daily trading range, the November contract could see an early retest of Monday’s $2.41 high today.

However, if November does not receive a push to the upside this morning, it could be in for another leg down, agreed traders and market-watchers. “Friday’s minor reversal to the downside didn’t quite kill off the upside potential, but we think follow-through under the $2.37 low for the session would — ending the upward corrective phase of the market and putting key prior lows at $2.22 and $2.14 at risk,” explained Tim Evans of New York’s IFR Pegasus.

Tom Saal of Pioneer Futures in Miami also targets the $2.37 area, but does so for a different technical reason. “In order for the adaptive moving average (AMA) and the moving linear regression (MLR) crossover to be complete, November needs to trade below $2.37.” Saal goes on to point out that largest sell-offs over the course of the past five months (mid-April, mid-June and mid-August) have come following the MLR moving below the AMA.

To take advantage of a potential downdraft in prices, Evans is short November from $2.43 with a protective stop at $2.54 to limit his risk.

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