The downtrend in the price of natural gas that was in place since May halted in August. Prices have recovered very well since then.

The US Natural gas price has risen over 14 per cent from $2.75 per mmBtu recorded in May and is currently trading at $3.14.

The forecast for hotter weather in the US saw the price surging about 4 per cent on Monday.

On the domestic front, the Natural Gas futures contract traded on the Multi Commodity Exchange (MCX) made a low of ₹176 mmBtu in early August and has reversed higher from there.

It is currently trading near ₹202 per mmBtu, up 14.8 per from the August low.

Outlook

The outlook for natural gas prices is bullish. The US gas price has risen above the key resistance levels of $3.05 and $3.10. Immediate resistance is near $3.16.

Inability to break above this hurdle can pull the prices lower to $3.10 or $3.05.

However, such dips are likely to find fresh buyers coming into the market.

As such the downside is expected to be limited to $3.10 or $3.05 in the short-term.

An eventual break above the resistance at $3.16 can boost the momentum. Such a break will increase the likelihood of the gas price rallying to $3.3 and $3.4.

The MCX-Natural Gas futures contract, on the other hand, has an immediate resistance around ₹204.

Inability to break above it can take the contract lower to ₹196 or ₹195.

The region between ₹196 and ₹195 is a strong support and a further fall below ₹195 is unlikely.

A rebound from this support zone will increase the likelihood of the contract breaking above ₹204. Such a break will pave the way for the next targets of ₹215 and ₹220.

Traders with a medium-term perspective can make use of dips to go long near ₹196.

A stop-loss can be placed at ₹188 for the target of ₹212. Revise the stop-loss higher to ₹200 as soon as the contract moves up to ₹205.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

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