Buoyed by follow-through buying on the heels of Wednesday’s late price surge and in reaction to weather forecasts (both for hot temps next week as well as the formation of Tropical Depression 2), natural gas futures shuffled higher for the third session in a row Thursday as short-covering promoted prices to new week-and-a-half highs. At the closing bell, the August contract was knocking on the door of some important technical levels, up 8.6 cents at $3.428.

Tropical Depression 2, located Thursday 700 miles east of the Windward Islands in the Atlantic, was downgraded to a tropical wave with maximum sustained winds of 25 mph, according to the National Hurricane Center. Although TD 2 has little chance of impacting natural gas platforms in the Gulf of Mexico, it sent a warning shot across traders’ bows reminding them that hurricane season has begun and that conditions will only continue to improve as the waters in the Gulf and Atlantic warm.

Also of impact yesterday was the release of fresh weather forecasts both for the intermediate- and long-term time periods. According to the National Weather Service, the central portions of the country from the Rockies to the Appalachians and from Mexico to Canada will see above-normal temperatures next week. New England and the West Coast are expected to see below-normal readings with the rest of the country expected to see seasonal temps. Further out on the horizon, the 30-day outlook is also somewhat supportive for prices. According to the Climate Prediction Center, a division of the National Weather Service, above normal temperatures are expected for the Southwest U.S. through Texas and the Gulf states during the month of August.

However, Cythnia Kase of New Mexico-based Kase and Company is unfazed by the weather outlook and remains bearish on natural gas. “There is nothing out there to tell me that this is anything other than just a correction in a bear market. Unless we see a break and settle above $3.50, this is only a correction.”

One of the primary factors influencing her outlook is the formation of a bear flag on the August daily chart. Since notching a $3.05 low on July 2 the August contract has made a series of higher highs and higher lows just about every day. Marked by this sort of rising channel within a larger down-move, a bear flag results in a continuation to the downside 90% of the time, according to Kase.

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