Natural gas futures lost nearly 8 per cent so far this week and is currently trading around ₹307/mmBtu. The fall was triggered by the price band of ₹355-360.
The decline is likely to be arrested at ₹300. Because this is a strong support where a rising trendline, 50-day moving average and 50 per cent Fibonacci retracement of the prior upswing coincide.
In addition, natural gas futures have bounced off this level twice in the past month. Therefore, there is a good chance for natural gas futures to see a rebound anytime from now.
In such a case, the contract can rise to retest ₹355-360 price band. A breakout of this can take it to ₹375.
On the other hand, if the support at ₹300 is breached, the outlook can turn bearish. Consequently, natural gas futures can drop to ₹268. The downtrend can extend to ₹252.
Trade strategy
Buy natural gas futures at ₹305 and place a stop-loss at ₹290. When the contract rebounds to ₹330, revise the stop-loss to ₹310. Exit at ₹350.
In case the contract slips below the support at ₹300 and triggers the stop-loss of above long position at ₹290, it could be a bearish indication. In that case, traders can short natural gas futures. Target and stop-loss can be ₹268 and ₹305, respectively.