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In mid-December, natural gas futures on the Multi Commodity Exchange (MCX) began its latest leg of downtrend. It started falling after facing resistance at ₹600. The fall was so sharp that the energy commodity lost over 70 per cent. The futures contract is currently quoting at around ₹173.
Only a rally past ₹200 can turn the near-term trend bullish and the medium-term trend can turn positive, if the price rises above ₹250. Until then, the bears are expected to be in control and traders can stick to their sell-on-rallies approach.
Given the prevailing price action, we expect natural gas prices to drop further. The futures price might drop to ₹160 and even to ₹150. The nearest resistance from the current level of ₹173 is at ₹200 and ₹215.
Considering the above factors, we advise that natural gas be approached with bearish inclination.
Trade strategy
Last week, we recommended selling at ₹190, with the initial stop-loss at ₹210. Now that the price has dropped below ₹180, the revised stop-loss would be at ₹200. Traders can retain this trade.
Going ahead, modify the stop-loss to ₹185, when the contract touches ₹170. Book profits at ₹160.
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