The November futures contract of natural gas declined over the past week and on Monday it tested a key support at ₹172.4. Observing the chart, one can see that the contract is consolidating and has been moving within a broad range between ₹172 and the resistance ₹184. The next leg of trend cannot be confirmed until the price breaks either of those levels. Notably, the price continues to trade below the 21-day moving average whereas the daily relative strength index and the moving average convergence divergence indicator are flat.

The trend prior to the consolidation was bearish and if the contract continues to decline and breaks below the lower boundary of the range, i.e, ₹172, the sell-off may intensify dragging the price to ₹160 over the medium term. But, in case, if the contract appreciates from current level, it will face a hurdle in the band between ₹182.3 and ₹184. Beyond that level, the medium-term trend of the commodity might turn bullish and as a result the contract might rise to ₹195.

On the global front too, the price of generic first natural gas price in ICE seems to be trading sideways between $2.2 and $2.4; also, it is trading below the 21-day moving average. Hence, for the contract to trend in a direction, the price must breach the limits of the range. Resistance above $2.4 is at $2.5 and support below $2.2 is at $2.05.

Since the commodity is trading within a range, the trend-following traders are advised to stay on the sidelines until the November futures contract of natural gas breaks either ₹172 or ₹184. However, until then, one can opt for range-trading strategies such as buying at range bottom and selling at range top. Stop-loss set must be adhered to, because the contract might be more volatile once it trades out of the range.

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