Over the last month, the prices of natural gas have seen a sharp fall. In this period, the natural gas futures on the Multi Commodity Exchange (MCX) slumped from about ₹535 to the current level of ₹272.
The weekly chart shows that the price band of ₹270-280 is a strong support. So, we might at least see a corrective rally triggered by short covering if not a bullish trend reversal. In such a case, the natural gas futures might rally to ₹400. The next leg of move will depend on how the contract reacts to the resistance band of ₹400-425. If the contract slips below ₹270, the downswing might extend to ₹250.
Trade strategy
On the back of the support at ₹270, traders can risk going long at the current level. Those who can take higher risk can add longs if price declines to ₹250 in addition to the buys taken at ₹270 so that the average buy price would be ₹260. Stop-loss can be placed at ₹230 at first.
When the price goes above ₹335, alter the stop-loss to ₹280. Further, on a move above ₹360, tighten the stop-loss to ₹325. When the futures touch ₹380, liquidate 50 per cent of the longs and move the stop-loss further up to ₹350 for the remaining longs. Exit the leftovers at ₹400.