Natural gas futures on the Multi Commodity Exchange (MCX) have been rallying for the past couple of weeks. The continuous contract has rebounded from the support at ₹175 and is now trading near ₹195.
Further rally from the current levels is less likely as ₹200-210 is a strong hurdle. In addition, the 50-day moving average resistance also lies at ₹200, making it a substantial barrier for the bulls to cross. Therefore, the chances of a fall from here looks high.
The contract can potentially decline to ₹175. A breach of this support can intensify the sell-off, leading to a possible fall to ₹150.
On the other hand, if the contract manages to surpass the resistance at ₹210, it can rise to ₹225 quickly. However, the chances of a rally past ₹210 looks slim for now.
Trade strategy
Go short on natural gas futures at the current level of ₹195. Add more shorts if the contract moves up to ₹206. Place stop-loss at ₹215 initially.
When the contract falls below ₹185, tighten the stop-loss to ₹195. Book profits at ₹175.