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The natural gas futures, after rallying between July and October, reversed direction after reaching ₹250 levels in early November.
The fall was sharp, and it appeared by then that the bears had an upper hand over the bulls. The price dropped below the key support of ₹200 before a couple of months. It further declined and by the end of December it hit a low of ₹169.
Around this price level was the 61.8 per cent Fibonacci retracement level.
The futures then started to recover and the rally that began last week looks strong. As a result, it appreciated above the ₹200 level, turning the outlook positive for the contract. The bullish reversal is supported by the price pattern on the daily chart — it has confirmed an inverted head and shoulder pattern with the neck level at ₹205.
Moreover, the daily relative strength index has gone above the mid-point level of 50 and the moving average convergence divergence indicator on the daily chart has entered the positive territory.
Also, the average directional index substantiates the strength of the rally.
The nearest hurdle it can face is at ₹228, a breakout of which can lift the contract to ₹250.
Traders can buy February futures contract on declines with stop-loss at ₹200.
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