After opening unchanged and checking sideways for the first hour of trading Friday, natural gas futures rocketed higher between 11 a.m and 12:40 p.m. EST as sellers backed away from the market and buyers became more aggressive.

Stop-loss orders triggered on the way up added to the buying intensity. However, after peaking at $5.53, the market tumbled lower Friday afternoon in a round of pre-weekend profit-taking. The January contract finished at $5.284, up 19.5 cents for the day and 90.1 cents for the week.

“We just went galloping higher. Everybody was a buyer, and sellers were virtually non-existent,” said George Leide of Rafferty Technical Research in New York. “At these price levels, the lack of liquidity — brought on by the exit of many commercial trading companies — is easy to see. When the market gets going in one direction, it is like we are trading in a vacuum… There were just no sellers out there [Friday].”

And while the frenzied buying and diminutive selling undoubtedly were responsible for the more than 90-cent increase last week, there were identifiable fundamental reasons for the price action. According to the Energy Information Administration, working gas in storage declined by a whopping 162 Bcf to 2,794 Bcf as of Dec. 6. Compared to last year’s withdrawal of 16 Bcf, the prior week’s decrease of 91 Bcf and the range of market expectations at 120-158 Bcf, the 162 Bcf drawdown was undeniably bullish. In fact, on only two occasions last winter did storage withdrawals exceed 162 Bcf. Because withdrawals have come at such a torrid pace thus far this season, the year-on-year storage level comparison has flipped from a 40 Bcf surplus to a 444 Bcf deficit in just six weeks.

Storage was not the only factor pointing to higher prices. According to the latest forecast released Thursday by Salomon Smith Barney meteorologist Jon Davis, not only will the upcoming “December thaw” be less warm than previously thought, it will also not reach all the way to the East Coast. The cold temperatures in the East will moderate, but only climb back to normal, not above-normal as Davis had predicted in a note to customers earlier last week. Looking further ahead, Davis calls for a return to below-normal readings for much of the country for the Dec. 22-26 time frame.

For possible insight on what to expect this week, traders Friday were poring over charts to find historical analogs. In October of 2000, natural gas prices were in a similar sort of price ascent. Led by the then-prompt contract, November, the market peaked at $5.78 on Oct. 12, 2000. However that market, which was less overbought than the market is currently, tumbled lower throughout the second half of the month to post a $4.38 low on Oct. 31, says Tim Evans of IFR Pegasus in New York. “Hindsight is 20/20, but that would have been your last chance to buy the market before it exploded,” Evans said. By December of that year, the market had extended to a new all-time commodity high of $10.

For that reason, Evans feels that it might be prudent to pick up some length this week on a retracement down to $5.00. “Don’t blink, you might miss your opportunity,” he warned. Evans goes on by explaining that you can’t use typical trade management strategies in a market like this. Instead, he consults his clients to use a micro approach and utilize a five-minute bar chart. “For example, as the market was selling off late Friday, you could have sold a $5.44 using a $5.54 buy stop to limit your risk.”

Leide agrees that the market is mighty top heavy at these levels. “We look to be scale-up sellers from here to the $5.71 level. On the downside, support is seen at $5.01,” he said.

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