Despite weaker cash prices, mixed weather forecasts and a loweropen, natural gas futures rumbled higher last Friday as traderscovered shorts in a technical frenzy that could pave the way formore gains this week. The prompt March contract finished up 8.3cents at $2.742 after posting a $2.62 low near the open.

A western physical player was at a loss to explain the screen’sstrength after watching her California border prices drop more thana dime for weekend flows. Even the Henry Hub physical deliverypoint for the futures contract was weaker, dipping about 8 centsfor the day to almost converge with futures.

For Tom Saal of Miami-based Pioneer Futures, the explanation ofwhat transpired Friday required you take a look back at Thursday’sactivity from both a technical and a fundamental perspective. “Thesell-off [Thursday and Friday] was on account of long liquidationin reaction to expectations for moderating weather early this weekand failure of the cash market to go higher. But when the cashmarket didn’t crater as badly as some thought, the market was hitwith a short-covering rally [Friday].”

Looking ahead, traders are mixed as to where the market willtrend from here. Some feel the market may be running out ofmomentum and prices will likely move lower to compress the $1.00premium held over last year at this time. Saal, on the other hand,is cautiously bullish and believes the forecasts for moderatingtemperatures have already been factored into the market. “Themarket moved lower after hearing about the possibility ofmoderating weather, but found good support at $2.62 whichcoincidentally is the first-of-month Henry Hub index. If we get anydivergence from that forecast when they are updated Monday, itcould translate into further advances,” he reasoned.

However the market may not have to wait until Monday to getrevised weather outlooks. According the National Weather ServiceFriday, the entire Northeast from Maine across to the Great Lakesand down to Virginia is expected to see below-normal temperaturestoward the end of this week.

And the market is also looking up technically, adds Saalpointing to a “textbook W bottom” on the weekly continuation themarket completed by settling above the $2.715 midpoint last week.The chart feature to which he refers has been forming sincemid-November and looks like a “W” with lows at $2.08 and $2.125.

In daily March technicals, Saal pegs resistance at last week’s$2.78 high ahead of the double top and contract high at $2.885. “Ifwe are able to move higher the $2.885 could be a ‘real zinger’ forthe market,” says Saal. “Most technicians know that a triple top isnot a top at all,” he said implying the third time could be a charmfor bulls.

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