Technical Analysis

MCX-Natural Gas: Go long above ₹136

Akhil Nallamuthu BL Research Bureau | Updated on June 30, 2020 Published on June 30, 2020

The July futures contract of natural gas on the MCX has been in a downtrend since early May after marking a high of ₹184.5. But the contract is on rally since past couple of sessions, that is, it is currently trading at ₹132.7 after registering a low of ₹115.5 last Wednesday. However, the major trend remains bearish and the price stays below the 21-day moving average (DMA). The contract should breach the resistance band between ₹133 and ₹136 to establish a sustainable rally.

The daily Relative Strength Index (RSI), though showing a fresh uptick, is below the midpoint level of 50. The Moving Average Convergence Divergence (MACD) indicator on the the daily chart lies in the bearish zone. Nevertheless, it is showing signs of recovery as the trajectory is currently pointing upwards.

Though the contract is on the rise, it should break out of ₹136 to turn the short-term outlook bullish. The 21-DMA coincides at ₹136, making it a strong hurdle. Above that level, the contract could rally to ₹142 — the 38.2 per cent Fibonacci retracement level, and ₹150. On the other hand, if the contract resumes its downtrend, it is likely to retest its previous low of ₹115.5. A break below this level could result in price declining to ₹110.

On the global front, the generic first contract of natural gas on the New York Mercantile Exchange (Nymex), recovered after briefly trading below the critical support of $1.5. But the overall trend remains bearish and the contract should breach $1.9 to turn the trend positive. Until then, the likelihood of bears regaining traction is more. A fall in price could act as a dampener for the contract on the MCX.

Trading strategy

Though the contract on the MCX and Nymex is on a recovery, both are trading below their respective resistance levels. Also, the major trend stays negative. Hence, traders can go long in MCX-Natural Gas with stop-loss at ₹125 if price breaks out of ₹136.

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

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Published on June 30, 2020
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