Though the price is higher compared to a year ago, the futures price of natural gas on Multi Commodity Exchange (MCX) has been facing substantial selling pressure since the beginning of November. During this period, the December futures contract has dropped from about ₹260 to the current level of ₹195, slipping below the ₹200-mark.
However, last week it bounced from its recent low of ₹175.9 and is hovering around ₹195. But the price action since past month is bearish and until the contract lies below ₹200, the rallies can be sold into.
Corroborating bearishness, the relative strength index and the moving average convergence divergence indicators on the daily chart lies in their respective negative territory. Also, the contract is facing a strong hurdle at ₹200. Moreover, the contract has formed a gravestone doji - a reversal candlestick pattern on the daily chart near a resistance level, indicating potential bearish reversal.
A resumption in the downswing can result in the contract retesting its previous low of ₹175.9. A breach of this level can drag the contract to ₹160.Considering these factors, traders can short the contract with stop-loss at ₹218.