Technical Analysis

MCX-Natural Gas trades above key base

Akhil Nallamuthu BL Research Bureau | Updated on December 10, 2019 Published on December 11, 2019

The recovery in the price of Natural Gas on the Multi Commodity Exchange of India (MCX) does not seem to be sustainable as it hit another roadblock in early November. The spot price of Natural Gas has declined by about 24 per cent, from ₹205 to ₹157 within a month. As we can notice, ₹156 is a substantial support.

Similarly, the December futures contract of Natural Gas in MCX has weakened during the same period to ₹157 from ₹212. The MACD indicator, being in the negative territory, continues to exhibit bearish bias. However, the daily Relative Strength Index (RSI) is showing signs of bears losing steam. The RSI not forming a lower low on the daily chart is a favourable condition for the commodity.

Other factor that may work against the prevailing bearish trend is that the spot price is trading near a strong support. If spot price recovers, the futures contract will most likely follow suit. Thus, traders on the short side, at the least, are advised to tighten their stop-loss.

If the contract bounces from current level, it will face a hurdle at ₹165. If it manages to break out of that level, it might even advance to ₹182 in coming days. But, if bears regain momentum and futures resume its downtrend, the nearest support it can find is at ₹155. On further weakening, it could slip to ₹148.

On the New York Mercantile Exchange (NYMEX), the generic first contract of Natural Gas has also found support at the current level of $2.2. On the upside, it will face a resistance band between $2.4 and $2.46, whereas the support below current level is at $2.

Trading strategy

As the price of Natural Gas on the MCX and NYMEX is at a strong support, the commodity might appreciate from current levels. Hence, traders can initiate fresh long positions with tight stop-loss.

Published on December 11, 2019
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