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MCX natural gas prices have resumed their uptrend. This is evident from the sharp 14 per cent rise in prices. The natural gas futures contract traded on the New York Mercantile Exchange (NYMEX) has skyrocketed 15.6 per cent in the past week from $3.26 per mmBtu to $3.77.
On the domestic front, the natural gas futures contract on the Multi Commodity Exchange (MCX) has surged 14 per cent over the same period from ₹225.1 per mmBtu to 256.5.
The MCX contract moves in tandem with the NYMEX contract. The recent rally marks the beginning of a fresh upward move, thereby keeping the uptrend that has been in place since November intact.
Outlook: The NYMEX natural gas contract has strong support in the $3.65-3.60 region and then the next key support is at $3.50. These supports are expected to limit the downside for the contract. A rise to test the 50 per cent Fibonacci retracement resistance at $4.05 is likely in the coming weeks.
On the domestic front, the MCX natural gas contract has strong support at around ₹220. Also, the 21-week moving average is on the verge of crossing the 200-day moving average.
This implies that the uptrend will remain intact and also that the downside could be limited. The contract is currently hovering around the 50 per cent Fibonacci retracement resistance at ₹256.
A decisive close above this hurdle may bring in fresh buying interest in the contract. Such a break will then pave the way for a rise to ₹280 or ₹290 thereafter.
Traders with a medium-term perspective can make use of dips to go long near ₹245. A stop-loss can be placed at ₹215 for the target of ₹285. Revise the stop-loss higher to ₹260 as soon as the contract moves up to ₹270.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.
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