Buoyed by cold weather in the Northeast U.S. and in sympathywith higher heating oil prices, natural gas futures checked higherin light holiday trading Monday as traders covered shorts initiatedin last week’s sell-off. At the closing bell the November contractwas 14.2 cents higher at $5.15.

Several traders were surprised by the market’s ability to forgehigher after the technical damage that was done last week.Regardless of whether they were looking at last Wednesday’s $5.05low basis November or the daily continuation chart low of $5.08carved out on Sept. 18, technicians were in agreement that Friday’s$5.008 closing price had opened the door for more selling pressurethis week.

“The patterns and actions [last] week give us reason to thinkthat our forecast will continue to unfold. Last week’s forecastcalled for prices to drop to a split target around $4.90 before amajor test would ensue. This week we will revise that level down to$4.885,” according to Cynthia Kase of New Mexico-based Kase andCompany.

However, she does not rule out a deeper move, possibly in theupper $4.60s or $4.70s which would be a precursor to a downsideobjective in the mid-$4.00s. On the upside, Kase sees resistance at$5.20 for November and $5.30 for December, but remains skepticalthat even a move to last week’s intermediate highs at $5.38 and$5.46 respectively would constitute a bullish reversal.

Tim Evans, of New York-based IFR Pegasus agrees with her bearishprice projection, but does so for more fundamentally-based reasons.”Natural gas locals may be chilly on the way to work Monday after acold front moves in from the Midwest over the weekend. While thatcould spark some renewed buying, the history of Northeast cold isnot all that encouraging. By the time the cold air mass hastraversed the rest of the country to get here, it is time to sellas a warming trend is sure to follow.”

He may have a pretty good point, because according to theNational Weather Service, temperatures are expected to warm up inseveral key gas consuming areas throughout the week. By Friday,high temperatures will near 70 degrees in Chicago, New York andBoston, the NWS said.

Also potentially bearish, is the latest storage report to bereleased Wednesday afternoon. Pegasus predicts injections will runin the 60-70 Bcf range, which would easily eclipse last year’s 49Bcf refill, further shrinking the oft-quoted year on year deficitnow at 407 Bcf.

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