Technical Analysis

MCX-Natural Gas hovers above a key support

Akhil Nallamuthu BL Research Bureau | Updated on November 12, 2019

The price of November futures contract of Natural Gas on MCX began rallying in the last week of October, wherein it appreciated and broke out of ₹200 levels from a low of ₹172.4. The contract registered a seven-week high of ₹205.9 in the past week. But, that level capped further gains and the contract started to moderate.

On Monday, the price slumped by 5.9 per cent, the biggest intra-day fall in November expiry. Thus, the contract has retracted by around 50 per cent of its previous rally as indicated by Fibonacci retracement, and at ₹188.2 lies the 50-day moving average. Though the moving average convergence divergence is still positive, the daily relative strength index is showing weakness.

From current level, the contract has an immediate support in the band between ₹184 and ₹186.2. It also coincides with 61.8 per cent Fibonacci retracement level, making the support significant. Below that level, the support remains at ₹172.4. In case if futures contract attracts buying interest at current level, the upward movement will face resistances at ₹198 and then at ₹205 — its recent high.

On the global front, the price of generic first Natural Gas contract in NYMEX too softened last week after making a high of $2.9. It is currently trading at $2.65, the 38.2 per cent Fibonacci retracement level. Further depreciation could take the price downwards to the support at $2.5. On the other hand, if the bull run resumes, the contract will most likely retest $2.9, beyond which the resistance is at critical level of $3.

Trading strategy

The price of MCX-Natural Gas is nearing a critical support and the trend in global price does not seem to have turned negative. Hence, until the price of MCX-Natural Gas contract stays above ₹184, one can be bullish but with caution. Fresh long positions must have tight stop-loss because a decisive break below ₹184 can intensify sell-off.

Published on November 12, 2019

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