Natural gas futures (December contract) on the Multi Commodity Exchange (MCX) has seen a sharp fall in prices since the beginning of November. The contract fell off the resistance at ₹320 and on Wednesday, it closed at ₹252.9.
Further fall from the current level is less likely as December futures of natural gas have a strong support region between ₹245 and ₹250. Going forward, we expect the contract to witness a bounce and rally to ₹285 in the near term.
On the other hand, if the support at ₹245 is breached, natural gas futures could see another leg of downtrend. Support below ₹245 can be seen at ₹215 and ₹200.
Overall, the natural gas future is now trading near a support and so, the probability of a bounce looks high. Also, the risk-reward is favourable for fresh long positions.
Buy natural gas futures (December contract) at the current level of ₹255. Target and stop-loss can be at ₹285 and ₹240, respectively.
As a risk management measure, when the contract touches ₹275, tighten the stop-loss to ₹265.