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Natural gas correction started, but bulls expect uptrend to remain in place

Outsideof a couple relatively short downside corrections in natural gas futuresrecently, a strong and steady uptrend has been in place since a bottom inprices was formed Aug. 12. Technical signals indicate that the uptrend mayremain in place in weeks to come.

Atlast look, ahead of expiration at the close of business Wednesday, Sept. 28,October natural gas was 8.5 cents lower at $2.911/MMBtu, while the near-monthcontract was 9.8 cents lower at $2.952/MMBtu.

"Themarket is still struggling to solidly breach the $3/MMBtu level and remainabove this level for a sustainable period of time," Energy ManagementInstitute principal Dominick Chirichella said.

Analystswith Oil N’ Gold said the medium-term outlook will remain bullish as long as$2.523/MMBtu support holds.

Therally has been bolstered by several bullish developments, including the Sept.20 breakout above the July 1 high on the continuation chart at $2.998/MMBtu.The breakout showed that the uptrend remains in place, which will give traderssome indication that corrections could remain shallow.

"Thisis a market that should find plenty of support below, so it's only a mattertime for the buyers get involved as far as I can see," FX Empire analystChristopher Lewis said.

Infact, "smart money" traders had signaled a potential in their bias inthe week ended Sept. 13, as the managed money net long position grew throughshort-covering that outpaced new longs by more than a 3-to-1 margin. The latestdata showed that the trend changed somewhat toward outright , as new longs outpacedshort-covering by nearly 2 to 1 in the week ended Sept. 20.

Longer-termsupport is still in place from a bullish flag pattern on the continuation chartdrawn over trade in July and August that projects to a target of $3.29/MMBtu.

Arising trend line on the November futures chart drawn off the lows May 19 andAug. 12 is also positive and pegs key support near $2.95/MMBtu. That level isbacked up by the 50-day moving average near the same price.

Bearswill pin their hopes on the high made on July 1 in November futures at$3.148/MMBtu. The highs in mid-September moved slightly above that level asresistance, but were not able to take it out decisively.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including SNL powerand naturalgas index prices, as well as forwardsand futures,visit SNL Energy's Commodities Pages.