With little in the way of fresh fundamentals or technicals in which to sink their teeth, bulls and bears did not stray too far from home Friday, as neither was willing to attempt a move ahead of the weekend. After opening at $2.14, the March contract shuffled sideways for four-and-a-half hours before closing even with Thursday’s settle at $2.138. At 53,618, estimated volume on Friday was extremely light.

Friday’s calm gave traders a much-needed break, and many used the opportunity to theorize where prices are headed next. While most market watchers favor another push to the downside, there is some disagreement on how low prices will go before finding a bottom. Some feel that there is still too much potential for winter weather for prices to fall too much farther than the March low from last week at $1.96. However, if prices bust through that level, February’s $1.85 low last week would be the next stopping point. Major support stands at the late September continuation chart low notched by the expiring October contract at $1.76.

However, a few traders polled by NGI Friday admitted gaining some comfort with last week’s price bounce. While the buying last week could only be described as lackluster, the price action set up a would-be double bottom formation on the daily continuation chart, providing the March contract can move back above the $2.17 level. For Tom Saal of Pioneer Futures in Miami, the sell-zone extends from the $2.17 level all the way up to $2.238, which coincides with 61.8% Fibonacci retracement from the $2.41 to $1.96 price move (March contract).

According to the American Gas Association, 111 Bcf was pulled from U.S. storage facilities for the week ending Jan. 25, leaving supplies at the 70% full mark of 2,294 Bcf. While deemed bearish by some market watchers because it was less than last year’s comparable 128 Bcf drawdown, the withdrawal was also constructive in a sense because it was near the top end of market estimates calling for a 95-120 Bcf figure. Storage now stands 1,053 Bcf above year ago levels, up slightly from last week’s surplus of 1,036 Bcf, but down from the peak surplus of 1,127 Bcf reached during the last week of December. Versus the five-year average, storage is currently at a 625 Bcf overhang.

With technicals and storage solidly pointing lower, even the most jaded bull trader was beginning to lose the faith late last week. But late Friday bulls got some potentially very good news in the form of the latest Commitments of Traders Report.

According to the Commodity Futures Trading Commission, non-commercial traders reduced their net short positions by a hefty 14,213 positions during the week ending Jan. 29. The group now holds a net short position of 48,430, down from the record high on Jan. 22 of 62,643. And although it is probably too early to tell if this one-week shift means anything to natural gas prices going forward, it deserves mention that the last time the non-commercial segment of the market reversed their short positions so emphatically in a one-week period was exactly two years ago, when the market was trading at $2.50 and just beginning its year-long march toward the $10 mark.

However, Saal is not ready to endorse the upside quite yet. “This is one week. We need to see a trend. Sure, it is possible that the funds will drive prices higher. They have done it before. But it is far from certain. What we do know for certain is non-commercial open interest — at nearly 71,000 — is at an all-time high. Because each fund is limited in the amount of exposure they can have in any one commodity market, this record open interest suggests that new funds, which have previously not dealt in natural gas, are entering the market. Stock funds have had a particularly difficult time as of late because of the choppy, volatile trading activity in U.S. equity markets. It is possible they are turning to natural gas as an alternative.”

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