The spot price of Natural Gas on the MCX broke below a key support last week and started to decline, aligning with the major downtrend. Following this, the February futures contract, that has been consolidating within the range between ₹133.4 and ₹140, dipped and breached the lower boundary of the range.

The break down from the range can be taken as a confirmation for more downside in coming days. Prior to the consolidation phase, the contract declined for two consecutive weeks to ₹134 from ₹157, losing nearly 15 per cent.

Despite the contract breaking below the range, the daily RSI is flat. But it remains below the mid-point level of 50. On the other hand, the MACD indicator on the daily chart is showing a lack of build-up in the bear trend, even though it stays in the bearish territory. Considering these factors, a prolonged consolidation at current level might increase the chances for a recovery.

If bears start to gain ground and the contract weakens, it can be expected to drop to ₹127 in the near-term. Below that level, it can decline to ₹120. But if the contract reverses trend, the immediate resistance is at ₹133.4, above which ₹140 can act as a significant hurdle. A breakout of the resistance at ₹140 can turn the medium-term trend bullish.

On the global front, the generic first contract of Natural Gas on the NYMEX, has broken below the range and thus opened the door for further depreciation. It might tumble to the support band between $1.61 and $1.69. Any attempt to recover can be capped by the resistance $2.

 

bl5FebmwMCXNaturalgasjpg
 

Trading strategy

The major trend is negative and the futures contract on the MCX has broken below the consolidation range. Thus, traders can take bearish view and sell the contract on rallies with a stop-loss at ₹142.

comment COMMENT NOW