Trend is bearish for MCX-Natural Gas

Akhil Nallamuthu BL Research Bureau | Updated on September 22, 2020 Published on September 22, 2020

File Photo   -  Reuters

The October futures contract of natural gas on Multi Commodity Exchange (MCX) that has been rallying from about ₹180 since early August marked a fresh high of ₹220.1 in the first week of September. The contract then reversed the trend and witnessed a sharp fall, erasing most of the gains is recorded in August. It is currently trading below the important level of ₹200. The contract marked a low of ₹185.2 last Thursday, before recovering to the current level of ₹198.

The price action is bearish. The daily relative strength index has slipped below the midpoint level of 50. Also, the moving average convergence divergence indicator on the daily chart has been charting a downward trajectory and has entered the bearish region. Also, as long as price remains below ₹200, bears can have an upper hand.

If the downtrend resumes on the back of the resistance at ₹200, the contract will most likely decline to ₹187. Below that level, ₹182 can act as a support. If the contract appreciates and breaks out of the resistance at ₹200, the short-term outlook can turn bullish and the price might rally to ₹208 – the 20-day moving average. Subsequent resistance is at ₹218.

Globally, the price of natural gas on New York Mercantile Exchange (NYMEX) tumbled last week as it fell below the crucial support of $2.25. The contract saw a sharp sell-off and it is currently trading between the support band of $1.8 and $1.9. A drop below $1.8 can result in price declining to $1.7 and $1.6. A fall in global price can weigh on the contract in MCX.


Trading Strategy

The contract on MCX is now trading below the critical level of ₹200. While the contract has posted gains in the past two trading sessions, the trend remains bearish. Hence, traders can initiate fresh short positions on rallies with stop-loss at ₹210.

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Published on September 22, 2020
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