Technical Analysis

MCX-Natural Gas in consolidation

Akhil Nallamuthu | Updated on January 28, 2020 Published on January 29, 2020

BL Research Bureau

The spot price of natural gas on the MCX has been in a sideways consolidation since the past week post a decline. However, the major trend remains bearish, and so chances of a recovery seem low.

Following the spot price, the February futures contract of natural gas is treading in a sideways path, oscillating between ₹133.4 and ₹140. Prior to the consolidation, the contract declined for two consecutive weeks to ₹134 from ₹157, losing nearly 15 per cent. Since the overall trend is bearish, one can approach the contract with a bearish bias.

The daily RSI is flat but remains below the mid-point level of 50. On the other hand, the MACD on the daily chart continues to exhibit weakness as it extends further into the negative region.

Since the major trend is bearish, the contract will most probably break below the lower boundary of the range at ₹133.4. In that scenario, the contract can be expected to drop to ₹127. Below that level, it can even slump to ₹120. Alternatively, if the contract moves upwards, it will face a hindrance at ₹140. Above that level, price can rally to ₹146.

On the global front, the generic first contract of Natural Gas on the NYMEX too is under consolidation between $1.85 and $2. If the contract breaches the support at $1.85 on the back of major downtrend, it can tumble to the support band between $1.61 and $1.69. Any attempt to recover can be capped by the resistance at $2.

Trading strategy

Though the major trend of Natural Gas is bearish, it is currently moving in a sideways trend. Hence, trading can be planned in two ways. Either short the contract with stop-loss at ₹152 if the price rebounds to ₹146 or short with stop-loss at ₹142 if the price breaks below ₹133.4, the lower limit of the range.

Published on January 29, 2020
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