March natural gas futures continued Monday’s advance and finished on the plus side of the trading ledger, but observers say the market still has some convincing to do before any resumption of the earlier uptrend can continue.

At the close March futures added 2 cents to $5.454 and April gained 2.7 cents to $5.432. March crude oil soared $2.80 to $77.23.

“I know it seems strange but when it gets mild in New York City, the market dips, and when we get cold weather the market starts to rally. We came in Monday after a frigid weekend, and once the market rallied over $5.295 it broke through a significant technical number and that puts us where we are today [Tuesday],” said a New York floor trader.

He added that the market needed to get above the $5.53-5.55 range and then it will get supported again. The trader sees the market “building a base” above the $5.36 area and “if it can do that without failing again, traders will take it on another shot up. We are playing the market on a more technical basis now rather than fundamental.”

Tuesday’s two-cent gain was nothing for the bulls to write home about, and other market technicians suggest that the market needs to rally another 30 to 50 cents before it would be able to set its sights on any higher objectives. Monday’s 30.3-cent advance coupled with Tuesday’s 2-cent rise could at least lay the groundwork for further gains.

“It was imperative the bulls produce a rally and that was exactly what they were able to do [Monday]. Two key levels must now be exceeded to confirm new highs are still ahead: $5.749 (0.852 of $5.869-5.060) and $5.953 (0.852 of $6.108-5.060),” said Brian LaRose, an analyst with United-ICAP. He cautioned, however, that if the market can’t make both of those objectives, “we would be looking for a deeper contraction. Clear these hurdles and $6.267 will be our minimum target.”

Weather model runs forecast still colder temperatures in the six- to 10-day period, MDA EarthSat said. “The forecast is colder overall today [Tuesday], especially across the South and East. Colder conditions are expected across the East early in the wake of a departing storm system, with much belows [normal temperatures] expected days six and seven.”

It added that the cooldown was not limited to just the South and East and said, “Much of the central and southern U.S. were also cooled from yesterday’s outlook, especially mid to late period as high pressure delivers cold air southward through the Midcontinent.”

Weather fundamentals and an improving technical picture are going to both be necessary if the market has any hope of continuing its unimpressive advance.

“Technically, prices bounced back up to test the trendline that had been broken to the downside last week. How it reacts from here will determine if this is just the dreaded return to the line (before falling further) or something with real legs that can keep prices walking higher,” said Peter Beutel of Cameron Hanover. “The bulls are going to need both technicals and temperatures on their side if they are going to have any chance of pushing quotes back up this week.”

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