The continuous futures contract of natural gas on the Multi Commodity Exchange (MCX), which hit a fresh 52-week high of ₹251.3 in early November, reversed the direction abruptly and started to depreciate. The decline continued where it marked a low of ₹165 in the ensuing month. Nevertheless, this level acted as a support against which the futures rebounded.

There has been considerable volatility since November and even as the contract moved in a particular direction, it faced significant pullbacks. This sort of price behaviour makes trading difficult because in one hand a deeper stop-loss and on the other it increases the probability of the stop-loss being hit. The price action continues to remain the same way even now.

As regards the direction of the next leg of trend, chances are that the bulls are gaining control potentially lifting the contract in the coming sessions. Reasons are that the contract has bounced off the support at ₹181 in the ensuing month twice in the past one month, making it a double bottom pattern and as a confirmation, the contract closed at ₹197.6 on Tuesday i.e., above the neck level of ₹195.

Corroborating the same, indicators like the daily relative strength index and the average directional index are showing that the uptrend is gaining momentum. Also, the moving average convergence divergence on the daily chart is trading a positive trajectory. Hence, traders can be bullish and buy April series MCX natural gas futures with stop-loss at ₹190. Potential near-term target is ₹212.

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