Buoyed by stronger cash market prices driven by a storm bisecting the country Thursday, natural gas prices floated higher throughout the session as traders cautiously covered short positions initiated in the month-long decline. The March contract finished at $2.138 and by virtue of its 5.8-cent advance secured its third straight up-day. There was less interest in the back months, which limited the 12-month strip to a 1.2-cent gain and $2.518 close. Volume was weak, with 75,990 contracts changing hands.

Several traders yesterday admitted being caught between what they felt should be done for the long-term versus what might be profitable in the short-run. While fundamentals remain undeniably weak going forward, traders have been bracing for a rebound for the last several weeks. However, after seeing that the rebound in motion, few traders were willing to back it too heavily. Instead, most market makers continue to look to “sell rallies” on the belief that any further up-ticks will be short-lived.

Pointing to a technical indicator called Bollinger Bands, Tom Saal of Pioneer Futures in Miami is advising his clients to take advantage of this “weak price momentum” by selling the market up to a $2.20 “pivot point.”

Similarly, Jay Levine of Advest Futures targets the $2.24 level as important and told his clients to look to short the market at this level if they have not done so already. While he believes that lower prices are in the offing, he suggests end-users look to pick up at least some of their summer requirements while the prices are at a relatively low level. “I might suggest a nearly costless collar put on by buying the July $2.50 call and selling the July $2.30 put. Essentially, that gives you a price cap of $2.50 and only costs a few pennies. There is no downside risk to the end-user because they are naturally short anyway.”

Looking ahead, there is little in the way of fresh fundamental news expected today. The latest six- to 10-day weather forecasts released Thursday by the National Weather Service calls for above-normal temperatures for a large triangular-shaped area drawn from Washington State to Maine to Texas. The rest of the country, which is comprised of both coasts, the Southeast and the Southwest, is expected to see normal mercury readings during the period.

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