The natural gas futures contract traded on the Multi Commodity Exchange (MCX) has been in a strong downtrend since August this year. There is room to fall further. The contract is currently trading at ₹564 per mmBtu. Resistance is in the ₹595-600 region. Any bounce from current levels is likely to be capped at ₹600. The contract can fall to ₹500 from current level.
The region between ₹505 and ₹500 is a strong support zone for the long-term trend. The current downtrend has a strong chance of halting here. A strong bounce from the ₹505-500 support zone can take the contract up to ₹590-600 initially. It can also be the beginning of a fresh long-term rally. So, traders taking short positions as recommended below should exit the positions as the contract approaches the ₹505-500 support zone. The price action in the ₹505-500 support zone will need a close watch.
Trading strategy
Traders can go short at current levels. Accumulate shorts on a rise at ₹585. Keep the stop-loss at ₹605. Trail the stop-loss down to ₹555 as soon as the contract falls to ₹540. Move the stop-loss further down to ₹530 when the contract touches ₹520 on the downside. Exit the short positions at ₹510.
