Commodity Calls

MCX natural gas rises with US prices

Gurumurthy K BL Research Bureau | Updated on January 09, 2018

Natural gas prices have been stuck in a broad sideways range all through this year. US natural gas prices have been range-bound between $2.72 and $3.17 per mmBtu since the beginning of this year.

The natural gas futures contract on the New York Mercantile Exchange has surged 10 per cent after reaching a low of $2.85 on November 1. It is currently trading near $3.14.

The natural gas futures contract on the Multi Commodity Exchange (MCX) has also moved in tandem with US gas prices. The MCX contract hit a low of ₹185 per mmBtu on November 1 but surged over 10 per cent from there. It is currently trading at ₹204. The sharp upward reversal over the last one week has taken the Nymex natural gas contract decisively above the 200-day moving average resistance level of $3.02. This resistance was capping the upside in the contract all through this year.

The current upmove can extend in the coming days and test $3.17 — the upper end of the range. Indicators on the charts suggest that there is a strong likelihood of the contract breaching $3.17 this time. Such a break will pave the way for the next target of $3.26. A further break above $3.26 will then increase the possibility of the contract targeting $3.32 over the medium-term.

This bullish outlook will get negated only if the contract declines below $3. In such a scenario, a fall to $2.8 is possible.

The MCX natural gas futures contract has risen breaking above the key 200-day moving average resistance at ₹196 as well as the psychological resistance level of ₹200 in the past week.

Immediate support is at ₹203. The region between ₹200 and ₹195 is a key support zone that can limit the downside in the short-term. A rally to ₹220 looks likely in the coming weeks.

Traders with a medium-term perspective can go long on dips at ₹200. Stop-loss can be set at ₹193 for the target of ₹215. Accumulate longs near ₹197.

Revise the stop-loss higher to ₹205 as soon as the contract moves up to ₹210.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

Published on November 07, 2017

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