The price of natural gas futures has been on a decline over the past month. It started to fall off the resistance at ₹400 (per mmBtu). On Wednesday, it hit a nine-week low of ₹289.80 before closing at ₹319.80.
The contract has a support at ₹300. At this level, a rising trendline coincides, making it a strong base. Therefore, the probability of a rebound from the current level is high.
The nearest resistance from the current level is at ₹335. A breakout of this can add momentum to the uptrend, possibly lifting natural gas futures to ₹375. A breach of this can push the price further up to ₹425.
On the other hand, if the contract slips below ₹300, it can extend the dip to ₹260. A breach of ₹260 can turn the medium-term trend bearish. Notable support below ₹260 is at ₹190.
Broadly, as it stands, the likelihood of a rally is high.
Trading strategy
Last week, we suggested buying natural gas futures if the price drops to ₹315. Traders who initiated this position can retain with a stop-loss at ₹285. But revise the target down from ₹425 to ₹375.