Natural gas futures on the Multi Commodity Exchange (MCX) has recovered well this week and it closed at ₹250.6 per mmBtu. This rally came on the back of the base at ₹225, which the contract formed in the first week of November.
Therefore, after losing nearly 18 per cent in October, natural gas futures is now showing signs of recovery. However, the price region between ₹250 and ₹258 is a notable resistance. So, the contract should break out of ₹258 for the bulls to gain traction.
If a breach of ₹258 happens, natural gas futures can quickly rally to ₹285, a barrier. There might be a decline after the contract rises to this price point. Resistance above ₹285 is at ₹300.
On the other hand, if the price falls from the current level of ₹250, the nearest support is at ₹225. A breach of ₹225 can lead to another leg of fall where the price could decline to ₹200. But broadly, as it stands, the contract is held between ₹225 and ₹258.
Trade strategy
Stay out for now. Buy natural gas futures (November) if it breaks out of ₹258. Keep a stop-loss at ₹245.
When the contract touches ₹275, alter the stop-loss to ₹265. Book profits at ₹285.