Natural gas futures has largely been in an uptrend since August last year. The continuous contract hit a high of ₹368.8 a month back. But then the price has been on a decline since mid-January.
However, the broader uptrend stays true as key supports are valid. Over the past week the price has risen. Nevertheless, this may not lead to a resumption in the rally.
Given the prevailing price action, we are likely to see one more dip in price before the broader bull trend begins.
The February futures is currently hovering around its 21-day moving average at ₹306, which is a potential resistance. This can trigger a sell-off.
A possible decline from the current level can drag the contract to ₹260, from where we can expect a rally in price.
In case the contract slips below ₹260, it can extend the downswing to ₹220.
But as it stands, the expected price trajectory is a fall to ₹260 and then a rally, which can lift natural gas futures to ₹375-380 price band.
Trade strategy
Short natural gas futures at ₹302 with a stop-loss at ₹320. When the contract drops to ₹280, revise the stop-loss at ₹292. Book profits at ₹260.