Technical Analysis

MCX-Natural Gas testing a key support

Akhil Nallamuthu BL Research Bureau | Updated on November 26, 2019 Published on November 26, 2019

The price of natural gas, which appreciated from a low of ₹182 to ₹212.3 towards the end of October, reversed abruptly in the first week of November and has since been in a downtrend.

Currently trading at ₹182.8, the December futures contract of natural gas breached a key support band between ₹193 and ₹195 during the past week. It also slipped below the 21-day moving average. The daily Relative Strength Index (RSI) is showing a down-tick, dipping below the midpoint level of 50; also, the moving average convergence divergence (MACD) is showing weakness. Thus, both RSI and MACD are indicating a weak outlook.

The contract has an immediate support at ₹182 and this level holds the key for the next leg of trend. As the contract has already bounced from that level twice within a span of a month, it might act as a strong support.

 

 

 

In case the contract takes support and advances from current levels, it will face a hurdle in the form of a resistance band between ₹193 and ₹195.

Beyond that level, the resistance is at ₹200. On the other hand, if the price breaks below ₹182, the contract will attract more selling and it could tumble to ₹175.7, below which ₹166 is the support.

On the NYMEX, the generic first contract of natural gas has been declining from the first week of November. The contract is currently testing the support band between $2.46 and $2.5. A break below this level may drag the contract to $2.36, whereas if the price rebounds, it will face stiff resistance at $2.71.

Trading strategy

Though the trend of natural gas is bearish, the contracts on MCX and NYMEX are trading near their respective support levels. Hence, traders are advised to initiate fresh short positions in MCX-Natural Gas if the price breaks decisively below the support at ₹182.

Published on November 26, 2019
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