The July futures contract of natural gas on Multi Commodity Exchange (MCX) appears to have resumed the downtrend that has been in place since early May this year. The contract had encountered a key resistance at around ₹144 and continued to trend downwards in the past week. Before that the contract was a near-term corrective up-move from ₹118 to ₹144. The contract is currently trading at ₹131 and test the 21-day moving average. It has an immediate support at ₹127. The daily relative strength index is charting downwards in the neutral region and is likely to enter the bearish zone if the commodity price continues to trend downwards. Further the daily price rate of change indicator is on the brink of entering the negative territory, indicating selling pressure could intensify.

A fall below the immediate support level of ₹127 can strengthen the downtrend and pull the contract down to ₹123 and then to ₹118 in the ensuing weeks. On the upside, the contract needs to decisively break above ₹144 to bring back bullish momentum and take the contract northwards to ₹150 and then to ₹158 over the medium term.

On the global front, the generic first contract of natural gas on New York Mercantile Exchange (NYMEX) had encountered a key resistance at $1.9 last week and began to decline. The contract appears to have resumed the medium-term downtrend that has been in place from this May high of $2.1. The contract has an immediate support at $1.7. A slump below this base can drag the contract down to $1.6 and then to $1.5 in the coming weeks. Resistances are at $1.9 and $2.

Trade strategy

The contracts on MCX and NYMEX are weakening and the price is heading southwards. However, the contract now trades above a key support. Hence, tread with caution and traders can consider taking fresh short positions on a decisive fall below ₹127 with a fixed stop-loss .

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