MCX-Natural tests a key support

Akhil Nallamuthu BL Research Bureau | Updated on September 15, 2020 Published on September 15, 2020

File Photo   -  Reuters

The September futures contract of natural gas on the Multi Commodity Exchange (MCX), that started to rally in mid-July, registered a high of ₹203 in the final week of August. But it was unable to move beyond the ₹200-mark decisively and started to moderate from that level.

Consequently, the contract breached the support of ₹180 and the 21-day moving average (DMA) last week, turning the outlook bearish. Currently hovering at ₹170, the contract has a key support at ₹168, where the 50 per cent Fibonacci retracement level of the prior rally and the 50-DMA coincide.

As the price has been in a decline over the past couple of weeks, the daily relative strength index has declined and fallen below the midpoint level of 50. Also, the moving average convergence-divergence indicator on the daily chart is in a downward trajectory and on the verge of entering the bearish territory.

Because of the prevailing bearish inclination, if the contract slips below the important level of ₹168, it will most likely descend towards the support at ₹155. Below that level, the support is at ₹145. On the other hand, if the contract gains traction and advance from here, it will face its first hindrance at ₹180. A breakout of that level can lift the contract to ₹195.

Globally, the price of natural gas on the New York Mercantile Exchange (NYMEX), which has been on an uptrend since late June, has witnessed a price correction from its recent peak of $2.74 to the current level of $2.3. Notably, $2.25 is a crucial support. If the price slips below this level, a deeper correction can be expected.


Trading Strategy

The contract on the MCX has been depreciating for the past two weeks and now tests an important support at ₹168. A break below this level can result in further correction. Hence, traders can sell the contract with stop-loss at ₹180 if price breaks below ₹168.

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Published on September 15, 2020
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