Commodity Calls

Natural Gas at a key resistance zone

Akhil Nallamuthu BL Research Bureau | Updated on January 14, 2020 Published on January 15, 2020

The January futures contract has been in a downtrend since the beginning of November last year. The contract price declined from around ₹210 to ₹150, losing about 25 per cent. The bear trend seems to be losing steam as the price has started to consolidate with a bullish bias between ₹150 and ₹160.

The 21-DMA lies around ₹158, acting as a resistance. The daily Relative Strength Index (RSI), though stays below the midpoint level of 50, is showing signs of recovery as it has formed higher bottom. The MACD indicator on the daily chart too shows positive signs. However, for the futures contract to reverse the trend, it should decisively rally past the resistance at ₹160.

If the contract manages to crack the resistance at ₹160, it is likely to advance to ₹166.5. A break of that level can result in price rallying to ₹172, which is a substantial resistance. This level coincides with 38.2 per cent Fibonacci retracement level of the previous bear trend. Alternatively, if the contract confirms bearish continuation by breaching the support at ₹150, it can depreciate to ₹140.

 

On the global front, the generic first contract of Natural Gas on the New York Mercantile Exchange (NYMEX) has recovered to $2.2 after making a low of $2.08 in early January. Notably, the price level at $2.2 can act as a hurdle. A breakout of the level could take the contract to $2.35 whereas if it resumes its downtrend, it might retest prior low at $2.08. Below that level, the support is at $2.

Trading strategy

The price pattern of Natural Gas on the MCX and LME indicates a potential reversal in trend. However, the contracts on both the exchanges are now facing a trend-defining resistance. Hence, traders are recommended to ‘buy’ MCX-Natural Gas only above ₹160 with ₹150 as stop-loss.

Published on January 15, 2020
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