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Natural gas futures (August series) on the Multi Commodity Exchange (MCX) broke out of ₹240 and marked a seven-month high of ₹250.3 last week. However, the breakout did not sustain, and the contract fell subsequently. On Wednesday, it closed ₹216.8.
The bears appear to possess some more fuel and are likely to drag the contract further down, possibly to ₹210, where a rising trendline is likely to meet the contract. Just below this level is the support at ₹205. Therefore, the price band of ₹205-210 is a support and a decline below this level is less likely.
So, after falling to the above-mentioned price band, we expect the contract to recover. In such a case, natural gas futures could rally back to ₹230 or even extend the upside to ₹240.
Considering the above factors, we suggest waiting for the price to fall further before initiating fresh positions.
Trade strategy
Buy natural gas futures when the price moderates to ₹210. Place initial stop-loss at ₹200.
When the contract moves up to ₹225, tighten the stop-loss to ₹216. Trail the stop-loss further up to ₹220 when the natural gas futures touch ₹230. Book profits at ₹240.
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