Trendlines, like exit polls for statisticians, can tell marketwatchers a lot about the direction in which things might beheading. And while some statisticians in political arena might bewell-advised to take a closer look at their rules and procedures oflate, technicians in the natural gas arena have had a pretty easytime forecasting market moves. Since smashing into long-termtrendline support on Oct. 31, the market has resumed its uptrendand erupted a dollar higher, leaving even the mostdyed-in-the-wool bear traders second guessing their stripes.December futures finished strongly again Wednesday, up 25.7 centsat $5.338.

Since notching a $2.125 low at the beginning of the year,natural gas futures have climbed higher and stayed above an upwardsloping trendline drawn by connecting lows from the dailycontinuation chart. Each time the market has retraced lower totest this support it has been met with strong buying interest anda resulting move higher. On May 5 the June contract notched a $3.01low only to do an about-face and shuffle higher through the restof its tenure as prompt month. Then again on July 26, the Augustcontract put in a $3.61 low, but once again trendline supportheld. Fast forward to last week, when December, pressured by ahost of bearish fundamentals, gave bulls a Halloween day scarebytumbling to $4.38 and retesting support, which at that time wasseen in the $4.36-40 area.

However, trendline support was not the only thing pointing tohigher prices yesterday. Traders were also watching for theDecember contract to break above its 40-day moving average at$5.225. They didn’t have to wait long. After gapping higher on theopen, the December contract was pressured higher by steady wavesof commercial buying, a floor trader said. By 11:30 AM (ET) the40-day averagewas in the rearview mirror. Ira Hochman, aconsultant to several key local traders at Nymex, put out a buyrecommendation early yesterday as the market advanced higher.Specifically, his intra-day fax endorsed “buying Dec at $5.27 witha $5.225 sell stop to limit risk.”

As it turns out, that recommendation was on the money becausemoments after fresh storage data was released, the market dippedto $5.23 only to rebound right back into the $5.40s. According tothe American Gas Association, 36 Bcf was injected into undergroundstorage facilities last week, bringing storageto 2,748 Bcf or 83%full. Looking at the numbers, one could make the case for eitherthe bulls’ or bears’ side. Bulls are able to point to the dramaticfall-off between last week’s 70 Bcf and this week’s 36 Bcf refill,while bears maintain that the report was bearish because theinjection easily eclipsed the 12 Bcf injection seen last year atthis time.

Despite the violent down-then-up price action it induced, thestorage reportwas dubbed pretty much a non-factor by most traderscontacted by NGI.

Looking ahead, traders are a little skeptical of the market’sability to continue higher without first taking a breather. Forthat reason, Hochman will watch for what he calls a neutral ornegative day structure — either of which will convince him tosell. “If we open higher and aren’t able to develop above[Wednesday’s] high, I’d look to be a seller. I didn’t think we’dmove up so quick. If we aren’t able to take out prior highs, youhave to sell against $5.44,” he said.

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