Commodity Calls

MCX-Natural gas: Go long above ₹143

Akhil Nallamuthu BL Research Bureau | Updated on July 07, 2020 Published on July 08, 2020

The July futures contract of natural gas on Multi Commodity Exchange (MCX), which has been in a downtrend since early May, seems to have reversed the direction. It took support at about ₹115 and has been rallying since past week. The contract is now testing the resistance at ₹143, where the 38.2 per cent Fibonacci retracement level. A decisive break out of this level can turn the outlook positive, at least in the short run.

Corroborating the bullish bias, the daily relative strength index has been rising and has gone above the midpoint level of 50. The moving average convergence divergence indicator on the daily chart, though below the zero-level, is showing a strong upward momentum. Also, the price has rallied past the 21-day moving average, which is at ₹133.

Since the contract is trading with a bullish bias, it is highly likely to extend the rally further. The immediate hurdle above ₹143is at ₹150 – a considerable resistance as 50 per cent Fibonacci retracement level coincides at that level. Above that level, the contract might advance to ₹158. On the other hand, if the contract loses strength and starts to decline, it might find a support band between ₹132 and ₹136. Subsequent support can be ₹126.

 

On the global front, the generic first contract of natural gas on New York Mercantile Exchange (NYMEX) recovered sharply after taking support at $1.45. The rally has resulted in the contract inching above the critical level of $1.9 and by looking at the bullish momentum, the price might move past $2 as well. The uptrend can also lift the contract in MCX.

Trade strategy

The contracts on MCX and NYMEX are in a strong bull trend and the price action of both indicate the rally will extend further. But MCX-Natural gas faces a resistance at ₹143. So, traders can buy the contract with stop-loss at ₹130 if it decisively breaks above ₹143.

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Published on July 08, 2020
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