Natural gas futures (continuous contract) on the Multi Commodity Exchange (MCX) declined to the support at ₹210 last week, and has now rebounded in line with our expectations. While it closed at ₹209.3 on Friday, it opened with a gap-up on Monday. It is currently trading at around ₹216.
For the purpose of further analysis, we are considering September futures as the August contract’s expiry date is August 28.
The September futures is currently hovering at ₹226. While a resistance band is present between ₹235 and ₹240, support is placed at ₹215. At the moment, the contract is hovering around the mid-point of the region.
If the contract rallies and breaks out of ₹240, it could see a quick rally to ₹250. But if it falls below ₹215, the price could head lower to the ₹200-205 band.
Trade strategy
Although the likelihood of a rally looks high from here, the risk-reward is not attractive. Therefore, traders can stay on the fence for now and buy if the price softens to ₹215. Stop-loss can be at ₹208. Book profits at ₹235.
Traders holding longs in August series can exit and consider the above trade recommendation.