Stocks

MCX-Natural gas: Buy above ₹170

Akhil Nallamuthu BL Research Bureau | Updated on August 11, 2020 Published on August 12, 2020

The August futures contract of natural gas on Multi Commodity Exchange (MCX) witnessed a strong rebound from the 21-day moving average last week. The rally resulted in the contract breaching the important resistance of ₹150, which had been acting as a roadblock for the bulls since the beginning of June. A breakout of this level has turned the outlook positive for the contract.

Corroborating the bullish outlook, the daily relative strength index is on a rise along with the contract and the moving average convergence divergence indicator on the daily chart is charting an upward trajectory and lies in the bullish zone. However, in the past few trading sessions, the price has been fluctuating in the between ₹160 and ₹170. At ₹160, the 23.6 per cent Fibonacci retracement level coincides, making it an important support. But the contract should rally above ₹170 to establish next swing of uptrend.

If the bulls gather momentum and lifts the contract above ₹170, it can rally to ₹180 in the near term. Above that level, it can even rally to ₹192. On the other hand, if the price slips below the support of ₹160, it is likely to decline towards ₹150. A breach of this level can turn the outlook bearish with the nearest support at ₹140.

The positive trend is supported by the generic first contract of natural gas on New York Mercantile Exchange (NYMEX). The contract, that broke out of the crucial resistance of $2, also glided past the 200-day moving average – a potential indication of a shift in long-term trend. Currently trading at $2.2, it faces a resistance at $2.28. A breakout of this level can extend the rally further.

Trade Strategy:

The contracts on MCX and NYMEX have risen sharply over the past week. Notably, both the contracts have taken out their respective critical resistances. But since MCX-Natural gas is now facing a hurdle at ₹170, traders can go long with stop-loss at ₹155 if price rallies past ₹170.

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Published on August 12, 2020
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