Technicals

Technicals, like a roadmap to a traveler, give natural gasfutures traders important clues as to where the market is takingthem. Although fundamental factors must never be ignored, they arehaving a vastly diminished impact during this low demand “shoulder”period. The April contract rocketed higher Tuesday after gappingabove a key technical level on the charts. April finished thesession at $5.621, up 29.9 cents on the session.

Spurred by a negative short-term technical outlook and coming onthe heels of bearish storage data, natural gas futures retracedlower Wednesday as traders took back gains notched during Tuesday’sprice rally. At the closing bell, April was off 24.6 cents tofinish at $5.041, 2.2 cents below Monday’s close.

Pressured by a triumvirate of bearish factors — weather,technicals and cash prices — natural gas futures plodded lower inan abbreviated, pre-holiday session Friday as weak longs continuedto shed their positions. However, instead of liquidating theirlongs entirely, traders elected to roll their prompt holdings intoout months. At the closing bell, the February contract was 23.6cents lower at $8.472 while the summer strip (Apr.-Oct.) was 6.7cents higher on the day at $6.085.

For the third trading session in a row, natural gas futuresopened higher yesterday, but unlike Monday when prices driftedlower, the movement was positive Tuesday as traders positionedthemselves ahead of today’s storage report and the continuation ofunseasonably cold temperatures.

Since notching a $2.12 low during the first week of this year,the natural gas futures market has shown a propensity to look pastvirtually all bearish information and focus on anything out therethat is remotely bullish. Witness yesterday, when prices sank earlyon fizzled hurricane fears only to rebound fiercely as tradersrallied natural gas in sympathy with spiking crude oil prices.

As if tethered to a bungie cord, natural gas prices bounced backyesterday at the New York Mercantile Exchange as temperatures alongthe East Coast soared into the 90s. Those record-setting readingsalong with stronger crude oil and physical natural gas prices gavetraders the opportunity to reclaim a large portion of last week’sprice slide. The June contract received the biggest boost, pushing14.5 cents higher to finish at $3.17.

After drifting sideways for much of the session yesterday,natural gas futures were hit with a late round of selling upon therelease of fresh industry supply data. The May and June contractswere hit the hardest, each tumbling 4.3 cents to finish at $3.055and $3.075 respectively. Estimated volume was average with 78,378contracts changing hands.

Despite a positive open and stronger cash prices, natural gasfutures slumped into the weekend as traders surveyed the prospectof more bearish news this next week in a market that many feel isalready overvalued. After opening at $2.81 the prompt contract wasunable to muster much in the way of upward momentum, and that setthe tone for a choppy, range-bound trading session. April finisheddown 1.2 cents at $2.774. Estimated volume confirmed the lacklustertrading, as only 43,848 contracts changed hands.

After a tumultuous morning rally and retreat, natural gas pickedits way higher yesterday as traders looked past a mixed technicalpicture to focus instead on the possible reemergence of seasonaltemperatures by week’s end. The April contract advanced 2.5 centsto $2.85. However, the real stories were in the out months, whichgalloped higher to post gains of 3.4 cents and 3.5 cents for thesummer and 12-month strips respectively.