Natural gas futures hit a four-month high of ₹233.4 this week. When the price action is considered, there are no signs of the rally fizzling out. However, the long-term chart shows that ₹235 is a resistance. Making this stiffer, a trendline falls at this level.
Therefore, we might see a correction in price, if not a bearish reversal. The trend will turn bullish only if natural gas futures fall below the support at ₹205. Until then, the view will be positive, but there might be a moderation in price from the current level of ₹220.
The dip in price can go up to ₹205, its 200-day moving average. If a rebound from this level can help natural gas futures breakout of ₹235, it will open the door for a new leg of the rally. Resistance levels above ₹235 are at ₹250 and ₹270.
Trade strategy
Refrain from taking new positions at the current price. Buy natural gas futures if its price dips to ₹205. Place stop-loss at ₹195. When the contract rises above ₹225 after this trade is initiated, raise the stop-loss to ₹210. Book profits at ₹235.
If the natural gas futures breakout of ₹235, either after a correction or from the current level itself, go long. Stop-loss can be at ₹220. When the contract surpasses ₹250, alter the stop-loss to ₹235. Further, tighten the stop-loss to ₹245 when the contract touches ₹260. Exit at ₹270.