Technically, you could call Tuesday’s price action at the NewYork Mercantile Exchange a rally. Not only because the spot Maycontract rose 9.2 cents to $2.561, but also because the marketmoved on strong technical buying. “Funds got back in the market ina big way,” a trader succinctly surmised, referring to an estimatedvolume figure which came in at more than 100,000 contractsyesterday.
An analyst said May received buying momentum from its failure tobreak below the $2.43 on Monday. “That was the third time May hitthat level but fell no farther. The more times that happens, themore likely it is that the contract will move in the otherdirection. Three times is oftentimes the charm,” he said.
One trader expressed concern that because Gulf Coast cash marketprices didn’t move much higher yesterday (up a nickel or so to the$2.45 area), May will likely drift lower before Friday. However,the analyst offered several reasons why this may not happen. First,he reminded that cash market prices should be lower than the Mayfutures market, because of the cost of carry. “There’s stillone-third of April left, so there should still be some spreadbetween the two months. Maybe not by its current 10 cents, butthere should definitely be a spread,” he said.
The analyst also noted that May’s settle above resistance at$2.56 and near its daily high of $2.58 may very well lead to morebuying today, especially since yesterday’s volume was so large. Mayfinished last night’s Access session up 0.9 cents to $2.570.
If the upward momentum continues, look for resistance at $2.645,a technician told GPI. Support for May remains at $2.43.
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