What a difference a week can make. For the third time in fourdays the April futures contract tested, but was unable to breakbelow stubborn support in the $2.71-74 area, leaving traders littlechoice but to bid up futures despite warming temperatures andfalling cash prices. The April contract finished up an impressive5.3 cents at $2.847. This advance came on the heels of last week’sprice activity, which saw the April contract twice test equallystubborn resistance at the $2.88-90 level. Aside from one falsebreakout to $2.67, the spot contract has consolidated within the$2.70-90 area since March 1.

For many traders, it was no coincidence the futures marketwaited until after the 11:30 (CDT) cash market nomination deadlineto rally higher. “For the first time this week, cash prices movedlower throughout the morning. Every other day they started lowerand moved higher, a Dallas marketer said. NGI’s Henry Hub averagefor today is off 3 cents at $2.75 after trading higher each of thelast two days.

For Ira Hochman, a technician with New York-based Trot TradingCorp., the recent consolidation reaffirms his bullish perspective.”As long as we stay above $2.69, we are in good shape,” he said.”We saw prices turn higher today. All we need is a littleconfirmation from Stochastics and we could see $3.05-10.” Developedby Dr. George Lane, Stochastics is non-trend following technicalindicator, which typically is used in sideways trading markets.According to Lane, the most important signal generated byStochastics is divergence, which is achieved when the market pricereaches new highs (lows) but Stochastics fail to reach overbought(oversold) conditions. Most technicians use 80/20 parameters tojudge overbought/oversold conditions. Yesterday’s Stochastic was56, down from 84 seen when the contract peaked at $2.90 last week.

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