Natural Gas prices are under pressure and its futures contract traded on the Multi Commodity Exchange (MCX) declined sharply after making a high of ₹580 per mmBtu on Thursday last week. The contract had tumbled 24 per cent since then and made a low of ₹438 on Tuesday this week. It has now managed to bounce back from this low and is currently trading at ₹456 per mmBtu.
Outlook
Considering the sharp fall since last Friday, the bounce is unlikely to sustain. The chances are high of fresh selling at higher levels. Resistance is at ₹483. A sustained break above this resistance is needed to ease the downside pressure and take the prices to ₹500 and above.
We expect the resistance at ₹483 to cap the upside and trigger a reversal. Such reversal can break the support at ₹435 and take the MCX Natural Gas contract further lower to ₹390 in a week or two. However, before this, a sideways consolidation between ₹435 and ₹485 is a possibility to happen.
Trading strategy
Traders can wait for a rise and go short at ₹475. Keep the stop-loss at ₹495. Trail the stop-loss down to ₹460 as soon as the contract falls to ₹445. Move the stop-loss further lower to ₹430 when the price touches ₹420 on the downside. Book profits at ₹405.