Technical Analysis

MCX-Natural Gas trades with bearish bias

Akhil Nallamuthu | Updated on December 31, 2019 Published on December 31, 2019

The spot price of Natural Gas on the MCX has been on a downtrend since the beginning of November 2019. The price continues to make lower peaks and lower lows — a bearish indication. Currently trading at ₹156, the price may drop to ₹146 in the near term.

Similarly, the January futures contract of Natural Gas on the MCX is in a bear trend. But the contract looks to have taken a pause as it oscillates between ₹156.4 and ₹167.8. Unless the contract moves out of this range, the next leg of trend cannot be confirmed even though the overall trend is bearish.

The relative strength index and the moving average convergence divergence indicator on the daily chart is visibly flat, unable to hint any direction. However, since the contract price remains below the 21-DMA, the short-term trend continues to be downward biased.

On the back of prevailing bearish bias, if the contract breaches the lower boundary of the range, it might decline to ₹145 in the coming days. Below that level, it could depreciate to ₹135. However, if the contract takes support and rally from the current level, it will face hindrance at ₹167.8, ie, the range top. Above that level, the contract could advance to ₹183.

On the global front, the price pattern of the generic first contract of natural gas on the NYMEX is similar to MCX trend. After declining from $2.9 to $2.15, the contract is now fluctuating within the key levels — $2.15 and $2.38. Thus, the contract should breach either of these levels to establish a trend.

Trading strategy

The price of Natural Gas on the MCX and NYMEX has been consolidating after a downtrend. Hence, traders are advised to stay on the sidelines until the contract moves out of the range. The direction of the break can confirm the next leg of trend.

Published on December 31, 2019
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