Commodity Calls

MCX-Natural Gas may chart upwards in the short-term

Akhil Nallamuthu BL Research Bureau | Updated on February 18, 2020

File Photo   -  Reuters

The spot price of Natural Gas on the MCX has been trading flat over the past one week. On the other hand, the March futures contract of Natural Gas on the MCX has been rising in the past few trading sessions and as a result, the premium at which the futures contract has been trading has gone up. This can be a bullish indication. The contract which has rallied past the 21-DMA, faces a resistance at ₹142.7. A decisive breakout is needed for a further upmove.

Substantiating the bullish bias, the daily Relative Strength Index (RSI) is showing an uptick. Moreover, it has moved above the midpoint level of 50 — a bullish indication. Also, the Moving Average Convergence Divergence (MACD) indicator on the daily chart shows that the momentum might be shifting in favour of bulls.

Thanks to these positive indications, if the contract breaks out of the resistance at ₹142.7, the medium-term trend might turn bullish, wherein it could possibly rally to ₹151. Above that level, the resistance is at ₹158. Alternatively, if the contract fails to break out and declines, ₹134 can act as a considerable support. Subsequent support is at ₹129.

On the global front, the generic first contract of Natural Gas on the New York Mercantile Exchange (NYMEX), as on the MCX, has been gaining for the past one week. It has also rallied above the 21-DMA, indicating a short-term bull trend. But it faces resistance at $2. Above that level, the resistance is at $2.1, which coincides with the 50-day moving average.



Trading strategy

The futures contracts of Natural Gas seem to be attempting to reverse the trend. But it faces a strong resistance near the current market price. So, traders are recommended to buy MCX-Natural Gas with stop-loss at ₹134, only if the price breaks out of ₹142.7.

Published on February 18, 2020

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