Buoyed by storm concerns and another overnight session dominatedby buyers, natural gas futures jumped higher yesterday to post yetanother all-time record high. After opening right on top ofprevious resistance at $5.10, the October contract raced to its$5.223 high during the first 90 minutes of trading, triggering buystops on the way up. October finished just off its high at $5.195,up 14 cents for the session.
Equally impressive were the gains seen in the out months, led bythe November contract, which rumbled 15.5 cents higher to close at$5.312. The winter strip kept pace, sporting a 14.1-cent gain toclose at $5.196.
To go along with precautionary storm-related buying, the futuresmarket also received a boost yesterday from technical buying asOctober futures moved above a key resistance level. Since themarket has moved into uncharted territory, traders have been forcedto look at Fibonacci extension levels, which are based on themarket’s trading range for a particular period. Specifically,traders are looking at the one-month $1.105-cent move from $4.715down to $3.61 that took place from June 27 to July 26. LeonardoFibonacci, a thirteenth century mathematician who rediscovered thatin the continuous number sequence, the quotient of any numberdivided by the next highest consecutive number approaches 0.618.Based on this mathematical relationship, technicians believe that38.2%, 50% and 61.8% retracements and their extensions aresignificant. By extending the previous high of $4.715 by 38.2% ofthe aforementioned $1.105 trading range, you get $5.14, and traderssaw a wave of speculative buying enter the market yesterday asprices passed above that level. In fact, October traded at $5.14 at11 a.m. (EST) and by 11:10 the prompt month was already at $5.20.
Looking ahead, technicians see resistance at the 50% Fibonacciextension at $5.27. Support resides at the $5.14 level and thenagain at $5.10.
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