Commodity Calls

Outlook remains weak for MCX-Natural Gas

Akhil Nallamuthu BL Research Bureau | Updated on December 03, 2019

The spot price of Natural Gas on the MCX in Multi Commodity Exchange of India (MCX) has been falling since the second week of November. It is currently hovering at the key level of ₹167 and the prevailing bearish trend is expected to be continued in the short-term.

Last week, the December futures contract of Natural Gas on the MCX slipped below the key support of ₹182 and made a low of ₹164.7. The contract has bounced up from that low and is currently trading at ₹171.5, attempting to make a recovery. Though the downtrend does not seem to have reversed, the contract might witness temporary recovery on the back of short-covering. But for the recovery to be sustainable, the futures should move past the resistance at ₹182.

The bear trend is corroborated by the RSI and the MACD indicators.

On the upside, the contract will face a hurdle at ₹176, beyond which there is a strong resistance at ₹182. On the other hand, if the contract resumes the bear trend, it will most likely retest its recent low of ₹164.7. Below that level, the support is at ₹160.

On the New York Mercantile Exchange (NYMEX), the generic first contract of natural gas is in a bear trend despite the recent recovery. Trading at $2.39, it faces a resistance at $2.4. Since the overall trend is bearish, the contract could start declining and fall to $2.2. Below that level, the support is at $2. Alternatively, if recovery sustains and the contract moves beyond $2.4, it can rise to $2.46.

Trading strategy

Though the contracts in MCX and NYMEX are attempting to recover, the overall trend is bearish. So, one can continue to hold bearish view in MCX-Natural gas until it moves past ₹182. Thus, traders can initiate short position when price rallies to ₹175 with ₹183.5 as stop-loss.

Published on December 03, 2019

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