While the March Nymex futures contract began Friday’s tradingsession on yet another up-note, a late sell-off brought it backdown to settle 2.9 cents lower on the day. The spot month went upas high $1.875, where it flirted with crossing over the 40-daymoving average, only to finish the day at $1.80.

“As long as we’re still below the 40-day moving average level[$1.8777], then there really isn’t something to write home about,”said one source. However, “the table is set and something has togive [today].” The source added that we’ll either see a smallsell-off or we could see this contract take off because we areright there near that 40-day moving average.

“The relative strength that took place Friday was probably dueto short covering that took place ahead of the weekend,” saidSusannah Hardesty, president of Energy Research and Trading Inc. “Isee additional upward momentum in spite of what the fundamentalsigns are telling us. Looking at the Average Directional Index(ADX) – utilized by some aggressive fund managers, and what I useto monitor when they are likely to come in and take a position -its values got down below 15 on Wednesday. That is a criticalsignal that says anytime on the first futures continuation that ADXvalue gets so low [such as 15], there is a high probability of asignificant directional move,” Hardesty said.

She added that while it doesn’t say which way that directionalmove will go, her seasonal moving averages – on the twelve-monthstrip anyway – have just rolled over to a buy, and the seasonaltiming says the contract ought to be in the time for an upsidecorrection. “The magnitude of this correction is going to largelydepend on whether we get another winter cold front [next week]coming through, which forecasters are talking about.” Hardesty’sinitial upside targets are somewhere around $2.15.

While Hardesty feels the latter scenario is the most likely, shesaid the contract could also come back down. “We’re in a reallyvolatile time frame and we could back down and test the $1.73[support] level. If we do, I think, given the patterns we’veestablished over the past two weeks, it’s going to happen firstthing [this] morning,” she added.

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