The continuous contract of natural gas on the Multi Commodity Exchange (MCX) witnessed a downtrend between October and December last year. The price declined from a high of ₹485 to a low of ₹265.5.
As the calendar turned 2022, the contract picked up positive momentum. Consequently, it attempted to reverse the trend upside a couple of weeks back. However, after facing resistance at ₹350, the contract declined below ₹310, which has been acting as a barrier since early December. But last week, backed by a huge volume, the contract cracked the resistance at ₹350 and closed the week at ₹361.7, gaining about 27 per cent for the week.
This has turned the outlook positive for the contract. While it is very much likely to touch ₹400 over the next two months or so, there can be a corrective decline from current levels. From the perspective of trading, the possibility of a correction and not so favourable risk-reward ratio for longs means, one could wait now and go in with fresh buys later.
Traders can buy the contract when it dips to ₹350 and add more when it drops further to ₹325 so that the average buy price is around ₹338. Stop-loss can be placed at ₹305 i.e., below the key support at ₹310. When the contract rebounds back above ₹350 after dip, revise stop-loss to ₹325. Liquidate the longs ₹400.
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