The July futures contract of natural gas on the MCX has been moving in between ₹130 and ₹136 for the past one week. However, the major trend remains downward where the price has been in a decline since the beginning of May.

Substantiating the bearish bias, the price is well below the 21-DMA and the contract has been registering lower lows and lower highs — an indication of a strong bear trend. The daily RSI is moving downward and it stays below the midpoint level of 50. Also, the Moving Average Convergence Divergence (MACD) on the the daily chart, though flat, remains in the bearish zone.

Even as the contract is currently hovering around the support at ₹130, it could breach this level as the overall trend is bearish. A break below ₹130 can result in price declining to ₹125 and may even dip to ₹120. On the other hand, if the contract bounces on the back of support at ₹130, it is likely to face hindrance at ₹136. A breakout of this level can lift the contract towards the crucial resistance of ₹140, where the 50-DMA coincides.

On the global front, the generic first contract of natural gas on the New York Mercantile Exchange (Nymex), which was witnessing a downswing, took support at $1.6 and bounced last week. It is currently hovering around $1.7, with daily chart hinting that the contract could go up further where it could face resistance at $1.8.

Trading strategy

The overall trend of the contract on the MCX is bearish. However, it is currently testing a support at ₹130 and the contract on the Nymex hints at a short-term bump up in price. Hence, traders can either short MCX-Natural Gas contract with stop-loss at ₹138 if price breaks below ₹130 or short the contract with stop-loss at ₹145 if the price rallies to ₹136.

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

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