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The natural gas futures contract on the Multi Commodity Exchange (MCX) has been on a strong downtrend since October last year. This downtrend paused in the first week of December.
Thereafter, the contract has been consolidating sideways. The current range of trade is ₹265-₹310 mmBtu. Within this range the contract is currently trading at ₹288 mmBtu. Chances are high for the contract to move up towards ₹300-310 in the near-term. The contract is likely to break ₹265 eventually and fall to ₹245-₹240.
Short-term traders can make use of rallies to go short at ₹290 and accumulate shorts at ₹305. Stop-loss can be placed at ₹322. Trail the stop-loss down to ₹290 as soon as the contract moves down to ₹260. Move the stop-loss further down to ₹270 as soon as the contract falls to ₹255. Book profits at ₹245. Note that the region between ₹245 and ₹250 is a strong long-term support zone.
The current downtrend is more likely to end here. A strong bounce from this support zone can have the potential to take the contract up towards ₹300 and much higher levels as we progress into the 2022.
As such, traders will have to unwind the short positions as the contract approaches the ₹245-240 support zone. Thereafter, they will have to start approaching the market from the buy side.
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