Natural gas futures on the Multi Commodity Exchange (MCX) broke out of the resistance at ₹225 in early March. However, bulls failed to take advantage of this, and soon gave up. The contract then fell again, giving a strong indication that the trend is still bearish and the rally, which lifted the price temporarily above ₹225, was only a corrective one.
Currently, natural gas futures (continuous contract) are trading around ₹195. From the current level, we expect the fall to extend to ₹180 — a strong base. We might see a bounce of this support. Yet, we have to wait and see whether that rebound will lead to a bullish reversal or will be restricted to a corrective rally.
A rebound from ₹180 will face hurdles at ₹210 and ₹225. On the other hand, if the contract breaches support at ₹180, we might see another leg of downtrend towards ₹160 and ₹150.
Trade strategy
A week back, we suggested going short at ₹206, with stop-loss at ₹225. Retain this trade but move the stop-loss to ₹212.
Thereafter, when the contract touches ₹190, modify the stop-loss to ₹200. Book profits at ₹180, as the natural gas futures might again rebound from this support.