Gas futures observers concluded Tuesday’s 6.7-cent slide was afalse breakout to the downside because May was unable to breakthrough support yesterday at $2.82 and rebounded a healthy 6.6cents on the day to $2.888. The high for the day was $2.900, whilethe low was $2.820. The three-month summer strip rose 5.7 cents to$2.918.

“I think a lot of [Tuesday’s] selling was just due to margincalls [in the stock market],” said Ira Hochman or New YorkCity-based Trot Trading Corp. “It’s still hanging in there,” henoted.

“It closed near the low [Tuesday], and the guys who want thisthing up obviously came in and supported it. I was kind ofexpecting it to go lower past the mid-$2.70s,” he added. “I wouldlook to sell in the mid 90s and buy in the low 80s until somethingelse happens. Stay out of the middle. I think it will be choppydevelopment from here. If it can stay above $2.82, I think it willwork its way higher, probably staying in the range of $2.82-965.”

It was an “inside day” yesterday, which is considered neutralwith May’s high coming in lower than the high on Tuesday and May’slow coming in higher than the low on Tuesday. “If they open up[Thursday] and can’t take out $2.90, that won’t be too good. If itcan’t take out [Wednesday’s] high [on Thursday], I would expectanother sell-off. Each day [the high] gets lower and lower, andeventually it’s going to accelerate,” said one trader.

According to Tim Evans of Pegasus NatGas Report, the market is”more than fully valued up here. We closed higher on the day andthat’s positive. We didn’t make either a new low or a new high,which is neutral. I just think it increasingly needs bullish newsin order to prevent a serious decline. I don’t think the AGA reportprovides any bullish news. I don’t think the weather outlook doeseither. And I don’t think the season of the year does it. I thinkthe funds are heavily long, long to an extent comparable to wherethey were in October, and November was a horribly bearish month fornatural gas. There’s a lot of potential selling if this market canmake a definitive break to the downside, and I don’t think we’rethat far from making that definitive break.”

Evans said if May takes out $2.81, “it could really turn ugly”because underneath that price are a series of prior lows that couldtrigger sell-stops. “If you hit sell-stops under $2.81, that couldhit sell-stops under $2.77, which could hit sell stops under $2.74,and we could see an acceleration to the downside. That’s the realtechnical risk to this market. I think these are highly visiblesupport levels that even from off the floor of the exchange are notthat hard to spot. Breaking those prior lows certainly will getsome attention.”

The market apparently ignored the curve ball thrown by theAmerican Gas Association’s storage report yesterday. The AGAreported a 5 Bcf weekly withdrawal during the afternoon but revisedupward last week’s reported working gas level. Levels still standat 31% full. The report left many observers scratching their heads.

“I think the bottom line is that last week we were told [by theAGA] there was 1,021 Bcf in storage, and this week we’re toldthere’s 1,031 Bcf in storage, so we’re slightly more flush withstorage than we thought we were,” said one market analyst. “That onbalance is bearish, but not massively bearish.”

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