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The northward journey of the continuous futures contract of natural gas on the Multi Commodity Exchange (MCX) began in early April this year from about ₹180. It has been consistently moving up since then and two weeks ago, the contract hit a fresh high of ₹414.8.
Nevertheless, the futures were unable to sustain above ₹400-mark and fell to ₹350 levels within a week.
The contract is now trading near the 21-day moving average (DMA), which can offer good support.
Also, the 23.6 per cent Fibonacci retracement level of the prior uptrend coincide at these levels, making the price band of ₹350-355 a significant support.
There are no signs of a bullish reversal and indicators like the relative strength index (RSI) and the moving average convergence divergence (MACD) continues to show weakness.
Initiate fresh long at current levels and add more if price corrects to ₹335. Stop-loss can be placed at ₹320. If futures gain without dropping to ₹335 and move past ₹370, place stop-loss at ₹350.
On the upside, the contract has the potential to reach ₹388 and then to ₹400 in the near-term.
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