The natural gas futures on the MCX , which has been on a rally over the past week, has now reached an important point. Currently trading at around ₹745, the contract faces a strong resistance band between ₹730 and ₹760. It has already declined a couple of times after rallying to this price region.
So, although the recent trend has been bullish, we expect a price drop from here, at least a minor one. From the current level, nearest support can be spotted at ₹600. The 50-day moving average lies at ₹585 thereby making the price band of ₹585-600 a considerable base. Subsequently, there is a support at ₹540.
But note that a decisive breakout of ₹760 can result in a quick rally to ₹800, a potential resistance.
Since MCX natural gas futures is trading around a critical resistance level and the risk-reward ratio is favourable for selling at the current juncture, we suggest shorting the contract at the current level of ₹745. Place stop-loss at ₹770.
When price drops below ₹645, tighten the stop-loss to ₹680. Liquidate the short positions when the contract touches ₹610.
This is counter-trend trade, and we recommend you stick to the above said stop-loss and target levels strictly.