Commodity Calls

Short-term outlook is positive for MCX-Natural Gas

| Updated on January 09, 2018 Published on August 22, 2017




The selling pressure on the Natural Gas price has eased. The downtrend that had begun in May has halted and the prices have been moving higher since the beginning of this month. The US Natural Gas prices fell from a high of $3.43 per mmBtu in May to a low of $2.75 per mmBtu in the first week of August. The prices have reversed higher from this low and is currently trading at $2.96, up over 7 per cent from the month’s low of $2.75.

On the domestic front, the natural gas futures contract on the Multi Commodity Exchange has also risen sharply in this month, moving in tandem with the US gas prices. The contract had slumped 20 per cent from its May high of ₹220 per mmBtu to record a low of ₹176 on August 4. However, the contract has reversed higher by gaining over 8 per cent from this low and is currently trading at ₹191 per mmBtu.

Outlook

The price action on the chart suggests that the short-term outlook is bullish for the MCX-Natural Gas. The intermediate pull-back move from last week’s high of ₹193.4, has found strong support at ₹184. After hovering above this support for a few days, the contract has reversed higher again. This signals the resumption of the uptrend that has been in place since the first week of this month.

Immediate resistance is at ₹193. A strong break above it can take the contract higher to ₹197 or ₹198 in the short term. Inability to break above ₹198, can trigger a pull-back move to ₹193. But a strong break and a decisive close above ₹198 can boost the momentum. Such a break will increase the likelihood of the contract extending its upmove to ₹203 or ₹205.

Short-term traders with a high-risk appetite can make use of dips to go long at ₹189. Stop-loss can be placed at ₹183 for the target of ₹197. Revise the stop-loss higher to ₹190 as soon as the contract moves up to ₹192.

The outlook will turn negative only if the contract closes decisively below ₹184. In such a scenario, a fall to ₹180 and ₹178 cannot be ruled out.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

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Published on August 22, 2017
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