The November futures contract of Natural Gas which had been moving between ₹172.4 and ₹184 for the last one month, moved past the resistance at ₹184, on Tuesday. With this break, the contract has moved above the 21-day moving average (DMA). This increases the probability of the contract appreciating further.

A daily close above ₹184 can be taken as a confirmation of the bullish trend. The daily relative strength index has moved past the midpoint level of 50 and the moving average convergence divergence indicator is also showing an uptick in favour of the commodity.

On the upside, the contract has the potential to rise towards the resistance in the band between ₹195 and ₹198. Notably, the 61.8 per cent Fibonacci retracement level of the previous downtrend is at ₹198. Beyond that, the contract can appreciate to ₹210 over the medium term. On the other hand, weakness from the current level coupled with failure toclose above ₹184 might increase the likelihood of the contract retesting the lower boundary of the range at ₹172.4.

On the global front too, natural gas seems to be gaining sharply as the price of generic first contract in ICE broke out of the range. It also rose above both the 21- and 50-DMAs and is currently hovering at the resistance of $2.5. Further appreciation can lift the contract price to $2.7. However, a decline could drag the contract lower to $2.4.

Trading strategy

Natural gas seems to be witnessing substantial buying interest in futures contract; this is also backed by rising natural gas prices in the global market. Since the price on the MCX has moved past a key level, one can take a bullish view on the commodity.

Hence, traders are recommended to initiate long positions on dips with stop-loss at ₹178.