Natural gas futures (April contract) on the Multi Commodity Exchange (MCX) fell off the resistance band of ₹158-160 last week. It closed at ₹141.2 on Tuesday. Thus, the contract has slipped below support at ₹142.
Going ahead, we expect natural gas futures to decline from the current level, possibly towards ₹130 in the near-term. However, there is a chance for it to see a minor rally, potentially to ₹148, before heading south to ₹130, a support. Subsequent support is at ₹120.
Since ₹120-130 is a good demand zone, natural gas futures could see a rebound from this region.
On the other hand, if the contract recovers from here and rallies past ₹148, it can retest the resistance at ₹160. A breakout of ₹160 can turn the short-term trend bullish. The nearest resistance above ₹160 is at ₹176.
Trade strategy
Two weeks ago, we suggested going short on natural gas futures at ₹156. As the price has fallen below ₹142, the revised stop-loss, according to our recommendation, would now be at ₹150. Retain this trade. Book profits at ₹130.