Technical Analysis

MCX-Natural Gas set to weaken further

Akhil Nallamuthu BL Research Bureau | Updated on February 11, 2020 Published on February 12, 2020

Representative image

The spot price of Natural Gas on the MCX continue to trend downwards. The contract has registered a new 52-week low on Tuesday. Following the spot price, the February futures contract has breached a key support at ₹130 on Monday. Prior to this, the contract was in consolidation phase for two weeks.

The major trend remains bearish and the contract lies below 21- and 50-DMAs, opening the door for further weakness.

The daily RSI is showing a fresh down-tick and it stays below the mid-point level of 50. On the other hand, the MACD indicator on the daily chart is exhibiting signs of further weakness.

Since the overall trend is bearish, the fresh break down has only made the case of bears stronger. Thus, the futures can be expected to decline further towards ₹120 in the near term. A break below that level can drag the contract to ₹115. Alternatively, if the futures reverse the trend and invalidates the break down, it will face a hurdle at ₹135.6 on the upside, where the 21-DMA coincides. Beyond that level, the resistance is at ₹140. A break above that level can turn the medium-term trend bullish.

 

On the global front, the generic first contract of Natural Gas on the New York Mercantile Exchange (NYMEX), like the contract in MCX, has broken below the consolidation range between $1.8 and $2 on Monday. As long as the price stays below $2, the contract will be bearish, and the contract could tumble to the support at $1.62. Any attempt to recover can be capped by the resistance at $2.

Trading strategy

The major trend of Natural Gas is bearish and the contracts on the MCX and NYMEX have broken below a crucial support, increasing the probability of further decline. Hence, traders can short MCX-Natural Gas with a stop-loss at ₹136.

Published on February 12, 2020
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