The May futures contract of Natural Gas on the MCX has been moving between ₹130 and ₹160 for a little over the past two months. While the trend seems to be sideways, the price has been trading above the 21-day moving average (DMA) since mid-March, signalling a bullish bias. The contract is currently hovering around the upper limit of the range, that is, ₹160. A daily close above that level is likely to turn the medium-term trend upward.

The daily Relative Strength Index (RSI) is showing a fresh uptick as it remains above the midpoint level of 50. The Moving Average Convergence Divergence (MACD) indicator on the daily chart is indicating a fresh upward momentum.

If the contract breaks out of the range, it will most likely advance to ₹170. Beyond that, the contract can rise to ₹180. On the other hand, if the contract moderates from current levels, it can find support at ₹146 — the 21-DMA. A break below that level can drag the price to ₹140.

The generic first contract of Natural Gas has broken out of the critical level of $2 on the New York Mercantile Exchange (Nymex). On Tuesday, it registered a four-month high of $2.14. The contract has been forming higher highs and higher lows on the daily chart since the beginning of April. Thus, the recent breakout can lift the contract substantially. This can positively influence the contract on the MCX.

Trading strategy

The contract on the MCX has been rising over the past week and is testing a crucial resistance at ₹160. On the global front, the energy commodity has moved above an important level of $2 as indicted by the contract on the Nymex. Considering these factors, one can take a bullish view on natural gas. Since the MCX-Natural Gas contract has a resistance at ₹160, traders can buy if the contract breaks out of that level. Place stop-loss at ₹145.

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

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