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Natural gas futures (continuous contract) on the Multi Commodity Exchange (MCX) has been volatile for over a month. Nevertheless, when looking at the price action since April, the contract has been forming higher lows despite the broader trend being negative.
This indicates that the contract is set to witness a corrective rally. Currently trading at around ₹190, there is a good chance for the price to go up to ₹212 in the short-term.
The nearest support, at ₹185, is a strong one, as there is a rising trendline coinciding at this level. Therefore, the natural gas futures contract is expected to use this base to rebound. Below ₹185, there are support levels at ₹180 and ₹170.
Also read: F&O Query: Should I buy natural gas futures? Will GAIL futures recover?
Trade strategy
Consider going long on the natural gas June futures contract now at about ₹190. Add more longs if the price moderates to ₹185. Initial stop-loss can be placed at ₹170.
When the contract rallies past ₹200, alter the stop-loss to ₹190. Further, when the contract touches ₹205, tighten the stop-loss to ₹195. Liquidate the longs at ₹212.
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