Technical Analysis

MCX-Natural Gas likely to turn bearish

Akhil Nallamuthu BL Research Bureau | Updated on March 10, 2020

The March futures contract of Natural Gas on the Multi Commodity Exchange of India (MCX) declined during the past week as it faced resistance at ₹135. The 21-DMA and the 38.2 per cent Fibonacci retracement level of the prior downswing coincided at that level, making it a strong hindrance. On Monday, on the back of broad-based selling, the contract fell and tested its previous low at ₹120. However, it rebounded sharply and ended the session at ₹131.1.

But the major trend remains bearish and until the contract trades below ₹143, a bullish trend reversal cannot be confirmed. Notably, at ₹143 lies the 61.8 per cent Fibonacci retracement.

Though the daily Relative Strength Index (RSI) is flat, it remains below the mid-point level of 50. Similarly, the Moving Average Convergence Divergence (MACD) indicator on the daily chart stays flat but remains in the bearish zone.

If the contract resumes to head south as the overall trend is bearish, its previous low of ₹120 will act as a considerable support. A break below that level can drag the price to ₹112. On the other hand, if the contract manages to rally past the 21-day moving average, it will face a substantial hurdle at ₹143 and a breakout of that level can take the price to ₹151.8.

On the global front, the generic first contract of natural gas on the New York Mercantile Exchange (NYMEX), like on MCX, has rebounded after declining to its previous low. However, it remains below the critical level of $2 and the trend remains bearish. Hence, the likelihood of weakening is higher.


Trading strategy

The futures contract of Natural Gas on the MCX is in a major downtrend and remains below the trend-defining level of ₹143. It also stays below the 21-DMA, keeping the short-term outlook bearish. So, traders can short the contract on rallies with a stop-loss at ₹143.

Published on March 10, 2020

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