Natural gas futures (April contract) on the Multi Commodity Exchange (MCX) depreciated over the past couple of weeks. It fell off the resistance at ₹176. Last week, it marked an intraweek low of ₹147.8 and closed at ₹150.3.
The daily chart shows that ₹150 is a good support and the bulls successfully defended this level twice over the last month. While this is not an indication of a bullish trend reversal, the probability of an upswing, which could at least be a corrective rally, has been increasing.
If April natural gas futures rally from the current level, it is likely to face resistance at ₹165 and ₹176. A breakout of ₹176 will change the short-term outlook bullish and can potentially lift the price to ₹200.
On the other hand, if the contract decisively breaks below ₹150, we expect a quick decline to ₹130. Below this is a critical long-term support at ₹120.
Trading strategy
Since the support at ₹150 is holding well now, traders can buy natural gas futures (April contract) at ₹156. Place initial stop-loss at ₹145. When the contract rallies past ₹165, raise the stop-loss to ₹158. Book profits at ₹176.