Commodity Calls

Natural gas futures: Stay cautiously bullish

Akhil Nallamuthu BL Research Bureau | Updated on August 05, 2021

 

The continuous contract of natural gas found support at ₹180. It went up in February this year and touched ₹240. But it reversed the direction and fell back again to ₹180 by mid-March.

However, after a brief period of consolidation in a tight range i.e., between ₹180 and ₹195, the contract started rallying in April.

This time, the bulls were stronger taking the futures above the resistance of ₹240 in June. Post the breakout, the rally gained momentum and even though it slowed down last week, buyers continued to push the price upwards.

Consequently, the contract broke out of ₹300-mark and closed at about ₹310 on Wednesday.

Signs of caution

Thus, the price action has made a fresh high and since April, the contract has been consistently making higher highs and higher lows. This is a bullish signal. Also, the contract has been rebounding from the 21-day moving average whenever there was a price correction. Hence, the price action is hinting at further rally. But there are some signs of caution.

The relative strength index (RSI) and the moving average convergence divergence (MACD), though remaining in the bullish region, are showing signs of a bearish divergence.

Traders can be bullish following the latest breakout, but should maintain a tight stop-loss for fresh long positions. On the upside, the contract can appreciate to ₹322.

 

Published on August 05, 2021

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