May natural gas futures eased in busy trading Tuesday as traders sensed an overextended market and an end to upward price momentum. Traders were looking for a close above $10.650 as an indicator that the upward trend in prices was still intact. May futures, however, fell 12.6 cents to $10.607, and June lost 11.1 cents to $10.763.

“If the market had been able to close above the mid-session highs or at least $10.65, that would have given credence to the upside,” said a New York floor trader. He added that at least in the near term the upward momentum had now stalled. “There are a number of traders with new long positions in the market, but they were ready to bail out of their positions at $10.47 to $10.49. Since the market is way above that, they are comfortable for now, but the more the market stalls at a given level, the more the ‘bailout’ area rises. That may now be as high as $10.55 to $10.56.”

Risk managers looking to lock in favorable prices for producers and physical market longs are taking a cautious approach. “On one hand the natural gas rally has been quite impressive (we have only had five monthly closes above $10 since natural gas started to trade) but nothing compared to what we have seen in the [petroleum] complex,” said Mike DeVooght of DEVO Capital, a Colorado-based trading and risk management firm. He said that at this time of year when weather is not an issue, the market would focus on demand (flat, for now) and the cost of substitute products, “which is quite bullish for the natural gas market at this time.” In spite of the rampaging crude and products market, “as a hedger and a product seller, we still feel light selling into this market for the balance of the summer is a good idea.”

Natural gas bears looking for help from an ailing economy got little assistance Tuesday morning with the release of existing home sales data from the National Association of Realtors (NAR). Expectations for the March figures were for existing home sales at a seasonally adjusted rate of 4.950 million homes annually. The actual figure came in at 4.930 million, down 2% from February. Over the past year sales of existing homes have declined 19.3%, NAR said.

Softening economy or not, market bulls are ready to ride the market higher. “We’re long May natural gas from approximately $10.10 — raise stop to $10.40. If not stopped, roll to June MOC [market on close],” said Phil Flynn of Alaron in Chicago.

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