Natural Gas futures – Will this rally continue? Trading strategy for MCX Natural Gas Futures

Natural Gas futures are back with volatility in the trading market and have encountered increase in volumes recently. You can see volatility and high movements in this counters. Traders have been tracking weather reports and production. 

Generatebucks - Natural Gas Futures
Generatebucks - Natural Gas Futures

Summer and winters are great time for traders to invest in Natural Gas futures since this commodity if very seasonal. Its seasonal nature makes it more attractive and profitable.  Obviously with profit comes risk.

Yesterday Natural Gas July futures closed around 166 on MCX while the global market hovered around $2.38. Natural Gas futures have been trading in the green zone for a couple of days since traders are expecting warmer weather in most parts of united states.

Future prices rallied from 158 to 168 in a day earlier this week on MCX. A major uptrend was expected this week but seems like natural gas futures couldn’t break resistance. This could result in short covering.

Fundamental Analysis

The weather is expected to be warmer for next few days but we could also expect temperature to go down later next week. With increase in demand, production of Natural Gas is expected to grow which means the supply concerns could be limited.

Production set a new high during the weekend and it is expected to grow by end of this week. Most traders are waiting for EIA report to release to get more clarity.

NatGasWeather said on Monday that its midday Global Forecast System data maintained hotter trends into early next week but dropped 4-5 cooling days around the middle of July.

Since next week will be hotter, demand for Natural Gas is expected to grow. Usually this this result in price to spike but this time it might not affect the prices. Majorly due to increase in production.

Price Forecast

Looking at immediate prices and charts, it is clear that Natural Gas futures trading on MCX are facing a strong resistance at 170. If buyer are able to break it, then we can expect Natural Gas to trade at 180-185 in near future

The short term target could be 170-173 for July NG futures.

If NG futures are seen trading below 159 then we can expect sellers to take over the market and prices could be seen trading around 151.

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Generatebucks - Natural Gas Futures
Generatebucks - Natural Gas Futures
Trading strategy

Day traders could buy NG futures for small target. Buy NG at 166-168 for target of 170 with Stop Loss of 164.

Positional traders should enter the market around 165 for a target of 180. Remember the trend could change if production is able to meet demand so you might have to hold the trade for long.

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