There were some wild swings in the prices of natural gas on Tuesday. While the generic first futures on the New York Mercantile Exchange in the US lost 16.5 per cent, the generic first futures on the Intercontinental Exchange in Europe shot up by nearly 28 per cent. This was triggered by the news that a facility in the US, which was shut following a fire last week, could remain so for longer than expected.
The prices of the natural gas futures on the Multi Commodity Exchange (MCX) in India slumped by 14.6 per cent on Tuesday to end at ₹573.6 as its price is based on US prices. The price rally in Europe was because the facility in the US, which is now shut, is a key supplier and there seems to be a drop in supply through the Nord Stream, that runs from Russia to Germany.
Outlook
The MCX natural gas futures has now turned bearish following the breach of the support band of ₹590-600. Moreover, the price has slipped below both 21- and 50-day moving averages and indicators like the RSI and the MACD on the daily chart are now in their respective bearish territory.
Currently trading at around ₹570, the nearest support can be spotted at ₹535. Subsequent support is at ₹500. But there could be a pullback to ₹610 before falling further. Given the above factors, traders can consider going short at the current level of ₹570 and add more shorts when the price rallies to ₹610. Place stop-loss at ₹630. Tighten it to ₹600 when the price declines to ₹535. Liquidate all the shorts at ₹500.