So, we expect natural gas futures to resume the rally at the current level of ₹520 or after rallying to ₹550. Therefore, we suggest preferring short positions at this juncture.
A downtrend from here can drag the contract to the prior low of ₹450.3, or it could even fall to ₹400, a support level.
On the other hand, a breach of ₹550 can turn the trend bullish and that will open the door for a rally to ₹600, a resistance level. Subsequent resistance is at ₹650.
Trade strategy
Since our outlook is bearish, we suggested initiating shorts in three legs last week. That is, go short worth one-fourth of your total intended amount at ₹482. Add 50 per cent worth shorts of your amount at ₹525, and the remaining one-fourth when the price touches ₹550.
Traders who do not hold any positions right now can go short at the current level. That is, short worth three-fourth of the intended amount at the current level of ₹520, and for the remaining one-fourth when the price touches ₹550.
For short positions suggested above, the initial stop-loss can be at ₹600. When the price declines below ₹450, tighten the stop-loss to ₹475. Exit all your shorts at ₹400.