The October futures contract of natural gas in the Multi Commodity Exchange (MCX), which has been falling since the past one month, registered a fresh four-month low of ₹179.1 last week. Since ₹180 is a considerable support, the price bounced off that level and is currently hovering around ₹196.

The contract has been witnessing higher volatility for the past couple of weeks, as indicated by increasing daily average true range.

The contract faces a substantial resistance at ₹200, where the 21-day moving average and the 50 per cent retracement level of the downtrend coincide. Notably, the relative strength index and the moving average convergence-divergence indicators in the daily chart lies in their respective bearish territories.

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So, even though the contract shows signs of recovery, the price should decisively break out of ₹200 to establish a sustainable rally. A breakout of ₹200 can take the contract to ₹210 and then possibly to ₹220.

Considering the above factors, traders can buy the contract with stop-loss at ₹185 if the price breaks out of ₹200.

Note: The recommendations are based on technical analysis.

There is a risk of loss in trading