The continuous futures contract of natural gas on the Multi Commodity Exchange (MCX), after blip in the first two months of 2021, began to rally from mid-January. However, the contract reversed the direction downwards in February third week and the fall was swift.
As a result, it had lost all the gains it made from the beginning of the year. That is, from its high of ₹223, the April futures contract of natural gas declined to mark a low of ₹179.8 within a span of one month, losing nearly 20 per cent.
But the support at ₹180 halted the fall in mid-March and the price action over the past three weeks shows that the contract has been moving sideways. While ₹180 provided support, the resistance at ₹190 prevented the contract from rallying above that level. But this level was decisively breached on Monday as the futures closed at about ₹193. Thus, the bulls seem to be gaining control over the contract which increases the likelihood of a rally form here.
Supporting the positive tendency that the contract exhibits, the relative strength index and the moving average convergence divergence indicators are showing fresh upward momentum. Also, the price has now pipped above the 21-day moving average. Hence,Traders can consider going long on declines with stop-loss at ₹180. The contract is likely to appreciate above ₹200 and rally towards ₹212 and possibly to ₹220 in the near-term. Traders who wish to play safe can initiate longs above ₹200.