In almost a carbon copy of Monday’s session, natural gas priceserupted higherTuesday morning only to spend much of the remainderof the session checking lower as traders took profits amidintra-day technical weakness and storage uncertainty. Ending athree-day, $1.25 dollar price rally, the January contract slipped4.9 cents to close at $7.384. Meanwhile, the 12-month strip tumbledconvincingly, down 13.6 cents to $5.555.

Traders were quick to point to strong followthrough on the heels ofa Salomon Smith Barney weather report released Monday (see Daily GPI,Dec. 5), as a key factor in Tuesday’sprice rally. However, for the second day in a row, the $7.95 levelproved impenetrable, and prompted locals and commercial traders totake profits.

For local Ira Hochman, the key momentum numbers in Januaryfutures are $7.62 and $7.82. He endorses a strategy of selling themarket on dips with a stop above the $7.62 level. On a retest ofthe $7.95 high, he looks to sell at $7.80, risking to $7.96.

Looking ahead, traders are eager to see what will happen whenfresh storage news is released Wednesday afternoon. Marketexpectations call for a 70-100 Bcf withdrawal, which if realizedwould surpass last year’s 69 Bcf drawdown, increasing the current499 Bcf year-on-year deficit. The only potentially damaging spin,adds New York-based IFR Pegasus, is the comparison with the 146 Bcfwithdrawal from last week.

After being stopped out of their long position at $7.47 for aneat $1.19-cent gain, Pegasus now looks to risk a short positionwith a $6.23 sell stop as their entry, with a $6.53 buy stop tolimit their risk. They will look to tighten those parameters as theprice action allows. In the meantime, they look for a break belowsupport at $7.25-30 which could lead to a retest of the $6.977 gapestablished Sunday night.

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