Natural gas futures on the Multi Commodity Exchange (MCX) has been on a decline since mid-June. It started to fall after facing a resistance at ₹265. A couple of weeks back it found support at ₹170. This level has been holding well since then.
The price action shows that the downtrend is losing momentum. If the support at ₹170 holds well, we can expect natural gas futures to reverse the trend northwards. From the current level of ₹180, the nearest barrier is at ₹195.
A breakout of ₹195 can confirm a double bottom chart pattern, which can lead to bullish trend reversal. In such a case, natural gas futures can rally to ₹220, a resistance. At this level, the 50 per cent Fibonacci retracement level coincides at this barrier.
On the other hand, if the contract slips below ₹170, the downtrend can extend to ₹135.
Trade strategy
Buy natural gas futures now at ₹180 and place stop-loss at ₹160. When the contract touches ₹195, revise the stop-loss to ₹180. When the contract rallies to ₹210, tighten the stop-loss to ₹190. Book profits at ₹220.