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The continuous futures contract of natural gas on the Multi Commodity Exchange (MCX), which hit a fresh 52-week high of ₹251.3 in early November last year, reversed the direction abruptly and started to depreciate.
The decline continued where it marked a low of ₹165 in the ensuing month.
Nevertheless, this level acted as a support against which the futures bounced. There has been considerable volatility since November, but in large, the contract is treading in a broad range of ₹180 and ₹220.
The recent leg of rally in the June contract began in April this year on the back of the support at ₹192.
The run-up has been strong, but it faced a considerable resistance at ₹226.
After reaching this level towards the end of April, the contract has been fluctuating between ₹218 and ₹226.
As it moved sideways, it hit the 21-day moving average (DMA) last week, which coincided at the support of ₹218.
Bulls, sensing an opportunity, pushed the price upwards.
Consequently, the contract moved above the key level of ₹220 and rose above the resistance of ₹226 on Monday.
A close above this level could re-establish the uptrend.
Supporting this, indicators like the RSI and the MACD stay in their bullish zone and we can observe a bullish flag pattern on the daily chart.
Traders can buy natural gas futures if the contract closes above ₹226.
While stop-loss can be at ₹218, target can be ₹242.
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