Natural gas futures on the Multi Commodity Exchange (MCX) faced a sharp fall in price between early November and mid-December. But over the past two weeks, the contract has largely been consolidating.

The January expiry natural gas futures has been oscillating between ₹195 and ₹212. A sideways trend after the sharp decline denotes bears losing traction. While this does not imply a bullish reversal, prolonged consolidation increases the chances of a corrective rally.

If there’s an upswing from here, then the contract can rally to ₹235, a resistance. Subsequent resistance is at ₹250. On the other hand, if natural gas futures declines below ₹195, there is support immediately at ₹185. Below this the support is at ₹165.

Trade strategy

Although recovery appears likely, natural gas futures should surpass the barrier at ₹212 to establish a rally. So we recommend staying on the fence for now and initiate longs if the contract rallies past ₹212. Place initial stop-loss at ₹194.

When the contract touches ₹235, tighten the stop-loss to ₹220. Book profits at ₹245.

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