Natural gas prices saw a sharp drop over the past couple of weeks. Consequently, the continuous futures of the natural gas on the MCX (Multi Commodity Exchange) fell from about ₹750 to the current level of ₹520. Before a week, it slipped below the 50-day moving average, adding to the bearishness of the contract.
That said, from the current level of ₹520, the contract has considerable support at ₹500. Hence, there is a good chance for the contract to rebound from this level. Such a bounce can lift the contract to ₹570, a resistance level.
Subsequent resistance is at ₹600. But if the contract breaches the support at ₹500, it can quickly drop to the support at ₹470. Below this, the price region of ₹400-410 is a good base. But note that there are also chances for the contract to consolidate in the price band of ₹500-570 for some time before establishing the next leg trend.
Last week, we had recommended to short MCX natural gas futures at around ₹590 with a stop-loss of ₹630. Now that the price has fallen below ₹535, as per our trade plan, the stop-loss would now have been revised to ₹600. Target was set at ₹500. Traders can retain the shorts for the same target i.e., ₹500. However, we suggest tightening the stop-loss from ₹600 to ₹575.