Commodity Calls

MCX-Natural Gas tests a key support

Akhil Nallamuthu BL Research Bureau | Updated on October 01, 2019 Published on October 02, 2019

The October month futures contract of Natural Gas in Multi Commodity Exchange of India surged in the month of September. But it eventually gave up all the gains and closed the month with a negative return of 2.1 per cent. It is currently trading at ₹165, below an important support level of ₹166.

Considering that the contract price recovers and closes above ₹166 on Tuesday, there may be a temporary halt in the bear trend. If the commodity attracts buying interest, the price could appreciate to ₹180 levels over the medium term. However, if bear trend continues to gain traction and the price breaks below ₹166 on closing basis, sell-off could intensify and the contract price may slump to ₹155.3 in the upcoming sessions. Hence, the support of ₹166 holds the key for the contract.

Global trend

Generic first futures contract of Natural Gas in ICE after gaining through the month of August and in the first half of the month of September, the price started to decline in the latter half of September, aligning with its major bearish trend. Currently, the price is hovering at the 50-day moving average at $2.31 level.

Considering the weakness, the price will decline further towards $2.24 levels, which is a considerable support. Below that level, the likelihood of price tumbling to $2 cannot be ruled out. However, if the contract bounces up from the 50-day moving average, it will face a hurdle at $2.4, beyond which the contract has the potential to appreciate towards $2.7 over the medium term.

Trading strategy

The trend is clearly bearish for the commodity. Since it is trading near a support level of ₹166, one need to keep an eye on how the price reacts to it. Tuesday’s closing is important and initiate sell order only if the contract breaks below that level with a stop-loss at ₹180 levels.

Published on October 02, 2019
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