The natural gas futures (continuous contract) on the MCX (Multi Commodity Exchange), which rallied in the first half of last week, rose above ₹700. But after trading above this level briefly, the contract fell back and closed at ₹630.9 last week. It extended the fall this week as it made an intraday low of ₹593.1 before recovering to the current level of ₹626.

Despite the recovery, the price action shows a bearish inclination, and it resembles a head and shoulder pattern on the daily chart. Though the pattern is yet to be confirmed, given the current momentum, we expect the price to decline below the neck level of ₹600. Notably, the price is below both 20- and 50-day moving averages, supporting the bearish bias.

Once the price slips below ₹600, the sell-off can intensify and the contract could touch ₹540 quickly.

Against this backdrop, one can go short on MCX natural gas futures at the current level of ₹626. Add more shorts if the price goes up to ₹645. Place stop-loss at ₹660 initially and bring it down to ₹635 when the contract slips below ₹600.

Revise it further down to ₹610 when it declines below ₹570. Exit all the shorts at ₹540 since it is a good support against which the contract can see a rebound.