Natural Gas futures down 51% in 5 months on MCX; Should you bottom-fish?

The MCX Natural Gas futures have declined over 6 per cent so far in March, and tumbled up to 82 per cent from the peak in August 2022.

The MCX Natural Gas futures is down 6.5 per cent in March so far, and have declined over 51 per cent in the last five months, tracking the losses in its international counterpart. Natural Gas prices in the US have declined sharply owing to robust production and a seasonally warm winter, thus reducing demand for the energy-based commodity.

As per reports, natural gas reserves stood well above its five-year seasonal average, owing to lower withdrawals from the inventories. In order to counter this, select natural-gas explorers have recently announced production cuts, and reduction in drilling activities.

Back home, apart from the straight 51 per cent fall in the last five months, wherein prices dipped from October end value of Rs 301 to present Rs 147-odd levels; Natural Gas futures at present are seen trading as much as 82 per cent lower when compared to its all-time high of Rs 801 registered in August 2022.

Given such an unprecedented fall, should you be bottom-fishing at this counter?

Here's what the charts predict.

MCX Natural Gas

Current Price: Rs 147.40
Support: Rs 130; Rs 110
Resistance: Rs 164; Rs 184

The price-to-moving averages action is clearly bearish for MCX Natural Gas futures as the shorter-term moving averages are seen placed below the longer-term moving averages. The 50-DMA stands at Rs 183.60, while the 100- and 200-DMAs stand at Rs 212.50 and Rs 217.50, respectively.

The MCX Natural Gas futures is presently seen testing support around its 20-DMA (Daily Moving Average) which stands around Rs 145.70. Break and sustained trade below the same can trigger a fall to Rs 107-odd levels. 

On the weekly scale, the recent lows around Rs 130 could act as near-term supports. However, break and sustained trade below the same, can lead to likely test of Rs 110 levels.

On the other hand, upside for the commodity for now seems to be capped around Rs 184 level, with interim resistance seen around Rs 164. Consistent trade above these levels can implicate some signs of a likely turnaround for the commodity.

To conclude, even as Natural Gas futures seem to be trading at attractive discount when compared to its historic highs, charts suggest that one needs to wait for a reversal signal before committing to trade.

For now, one can assume that Natural Gas futures could gyrate in a wide range of Rs 110 - Rs 184; with interim support and resistance around Rs 130 and Rs 164 levels, respectively.