In what has to have been the quietest session in recent memoryand one of the top five during the last year, natural gas futuresshuffled sideways Friday amid a dearth of fresh fundamental newsand technical developments. In its penultimate trading session, theMarch contract closed at $5.131, down 1.1 cents for the day, 43.7cents lower for the week, and a cool $1.00 below where it was whenit began its tenure as prompt contract back on Jan. 29.

Last week’s relatively quiet price activity, while seen as awelcome change to some traders, actually caused some concern toothers who are fearful that it was the calm before the storm. “Thisthing is scaring me a little,” a Houston trader said. “Bidweek isupon us, the March contract expires Monday, we have almost a monthleft in winter and natural gas trades within a single-digit range.It doesn’t add up.”

His concern, which is justified, is that when prices are able tomove outside of the recent trading range, they will continue toeither spike or plummet in the direction of the breakout. Inanticipation of this, traders have placed buy stops above thecurrent price level and sell stops below the current price level inan attempt to take advantage of the price swing.

Looking ahead to expiration day, Susannah Hardesty ofIndiana-based Energy Research and Trading expects one of twoscenarios being played out. Trading in March 2001 futures willeither conclude in a very orderly manner within the $5.00-25 rangeor break, possibly dramatically to one side or the other. If infact the latter case plays out, Hardesty believes the odds are infavor of a break lower, leading the market quickly to the nextlevel of support at $4.86.

Once March is off the board, it is likely that prices willcontinue to drift lower amid mild weather forecasts and a storagesituation that gets better with each passing week, continuesHardesty. The target for the second low of the winter is betweennow and March 23 on a move down to the $4.35 to $5.00 level. Shelooks to fine tune this prediction as the market shows signs ofbottoming.

April and beyond: Tom Saal and Ed Kennedy of Miami-based PioneerFutures agree that the market is coming to a soft landing, andtherefore are looking to buy the 12-month strip on any continuedweakness. Using technical trendlines and slow stochastics momentumindicators, they note that the 12-month strip (as of Friday’s closeat $5.28) is nearing a bottom. Support for the 12-month stripexists at $5.117.

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