The natural gas futures (continuous contract) on the Multi Commodity Exchange (MCX), which reversed after hitting a record high of ₹801 on August 23, declined to a one-month low of ₹620.1 last week. While it has recovered to the current level of ₹664, the overall bias remains negative. Even if the rally extends, it will most probably be capped at ₹700.

We expect the contract to resume the downtrend either from the current level of ₹664 or after hitting ₹700. It is likely to breach the support at ₹600 and touch ₹540 in the near term.

The relative strength index (RSI) and moving average convergence and divergence (MACD) on the daily chart are also showing bearish indications.

Based on these factors, one can consider initiating fresh short positions. That is, go short on MCX natural gas futures at the current level of ₹664 and add more shorts when the price rises to ₹700. Place stop-loss at ₹720. When the contract slips below ₹600, tighten the stop-loss to ₹635. Revise it further down to ₹610 when it declines below ₹570. Exit all the shorts at ₹540 since it is a good base.