MCX-Natural gas gets into consolidation

The September futures contract of natural gas in Multi Commodity Exchange (MCX) started to rally in mid-July and since then, it has gained over 30 per cent as it moved from about ₹145 to the current market level of around ₹190.

In fact, the contract marked a high of ₹203 last Friday. But it was unable to move beyond the ₹200-mark decisively and the bulls seem to be struggling to cross over that level. Looking at the daily chart, the contract appears to be consolidating within ₹184 and ₹200. The indicators are now showing a loss in upward momentum. For instance, the daily relative strength index has come off from its peak and pointing downwards. The moving average convergence divergence indicator in the daily chart is now turning its trajectory downwards. Nevertheless, it remains in the positive region and there is no confirmation of a bearish reversal yet.

In case if the contract drops below the support of ₹184, where the 21-day moving average coincides, the short-term outlook might turn negative and the price could fall to ₹167. But if bulls regain momentum and takes the contract above ₹200, the rally can intensify where the contract could rise to ₹210. Globally, the price of natural gas has been in an uptrend since late June as indicated by the contract in New York Mercantile Exchange (NYMEX). Currently trading at $2.6, it has considerable hurdles at $2.7 and $2.9 and these levels should be breached for the contract to extend the rally further.

The price action of MCX-Natural gas in the daily chart hint at a tug of war between the bulls and the bears and consequently, the contract is fluctuating between ₹184 and ₹200. Since the next leg of trend will be uncertain until either of these levels are breached, traders can stay on the fence until the contract gets out of the range.

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