Natural gas futures on the Multi Commodity Exchange (MCX) have witnessed a sharp decline in price in the last couple of weeks. But the price action over the last few sessions shows that the contract could see its price move up.
While the overall trend remains down, there might be a corrective rally from the current level. We are considering February expiry for the purpose of analysis and trade recommendation.
The February natural gas expiry saw a sharp bump in price in early trade on Wednesday, currently hovering around ₹184. The rally from here might take the contract price to the ₹195-200 band. Only a decisive breakout of ₹200 can turn the trend bullish.
Trading strategy
As there are chances for natural gas futures (February series) to see an uptick, traders can go long. That is, buy now at ₹184 and add longs in case the price dips to ₹181. Place stop-loss at ₹178. Book profits at ₹190.
Since the potential upswing from here is likely to be a corrective one, the above trade carries higher risk. So, risk-averse traders can stay out.