Natural gas futures have been rallying well since the beginning of this month. The June expiry of natural gas futures on the Multi Commodity Exchange (MCX) has appreciated nearly 20 per cent so far this month.

Currently trading around ₹257, natural gas futures show potential for further rises. That said, there is a good chance for the contract to see a corrective dip, possibly to ₹250. Note that at this level, a rising trendline coincides, making it a strong support.

So, going ahead, natural gas futures can either rally from the current level or see a minor decline to ₹250 and resume the rally. In either case, the contract can hit ₹275 in the near term. However, a breach of the support at ₹250 can result in the extension of the downswing, probably to ₹235, its 20-day moving average.

Nevertheless, as it stands, the bias is bullish, so traders can consider longs.

Trade strategy

Buy natural gas futures if it breaks out of ₹262. Target and stop-loss can be at ₹275 and ₹256, respectively.

But if there is a price drop from the current level, go long at ₹252 with a stop-loss at ₹240. When the contract rallies past ₹262 after this trade is initiated, tighten the stop-loss to ₹256. Exit at ₹275.