Natural gas futures on the Multi Commodity Exchange (MCX) has dropped considerably so far in October. While the October contract (₹190 per mmBtu) has lost 22 per cent, the November series (₹232 per mmBtu) is down by 17 per cent so far this month.
Notably, both the contracts have slipped below their respective key support levels. Since the October contract is nearing expiry, we shall consider the November series for analysis and trade recommendation.
The November expiry natural gas futures breached an important support at ₹250 early last week, turning the outlook negative. Last week, it closed at ₹233.3. According to the chart, the nearest notable support is at ₹200.
Given the current downward momentum and that the contract has dropped below the support at ₹250, which henceforth will act as a resistance, the probability of further decline is high.
In case there is a recovery, natural gas futures (November) should surpass ₹250 to turn the tide in its favour. Until then, the bears will have the upper hand.
Trade strategy
Short natural has futures (November) now at ₹232 and on a rise to ₹245. Place stop-loss at ₹255. When the price drops to ₹210, revise the stop-loss to ₹222. Book profits at ₹200.