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The natural gas futures contract traded on the Multi Commodity Exchange of India (MCX) is in a downtrend over the long and intermediate-term. However, the contract found support in early March 2016 at ₹109 per mmBtu and started to trend upwards.
Triggered by positive divergence in daily price rate of change indicator and weekly moving average convergence-divergence indicator, the contract reversed direction. Since then, the contract has been on a medium-term uptrend. While trending up, the contract has conclusively breached key resistances at ₹127 and ₹135 levels. The short-term trend is sideways with an upward bias.
On Wednesday, the contract surged 3.3 per cent, breaching an immediate resistance at ₹140 to trades at ₹143.70. Both the daily and weekly price rate of change indicators feature in the positive terrain, implying buying interest. The daily relative strength index is moving higher in the neutral region towards the bullish zone. Traders with a short-term perception can consider buying the contract at current levels.
The contract has gained momentum on Wednesday, as it surged over 3 per cent in that session. This rally has reinforced the near-term bullish momentum and has taken the contract above the key resistance level of ₹140.
The contract can now extend its up move and encounter immediate resistance at ₹146. Further break through of this hurdle can push the contract higher to the 200-day moving average, poised at around ₹150. Traders with a short-term view can buy the contract with a stop-loss at ₹139.
The medium-term trend is up. This uptrend will remain intact as long as the contract trades above the key trend-deciding level at ₹127. Key supports are at ₹135 and ₹127.
Strong slump below ₹127 will mar the uptrend and drag the contract down to ₹123 or ₹120 levels. On the upside, an emphatic breach of the key resistance as well as the 200-day moving average at ₹150 will pave way for an up move to ₹156-158 band. Traders with a medium-term view can buy with a stop-loss at ₹135 levels.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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