Buy Natural Gas; target Rs 147-170: Way2Wealth

Natural Gas: The only commodity that has declined more then 83% in the recent history from its all-time high of 591.60 levels. It had fallen unidirectional (bearish) for a period of three and half year with out any major interruptions. Now, it is the time to watch the gas prices action on the reverse direction. As, recently gas prices have tested the psychological barrier of 100 mark level and witnessed a short covering from the same and ended 13% up on Week-on-Week basis.

It is quite visible from the weekly chart that gas prices have formed a short-term trend reversal candle stick pattern called "white opening morubozu", which signifies bullish momentum for short-term perspective. A sharp breakout through the downward sloping parallel channel also confirms the bullish momentum in near-term perspective. It has reverse back into the breakout territory from the bearish running triangular pattern, signaling that the medium term bottom is in place. As, the moves after the triangular pattern are probably the final one because triangles are in majority formed either in wave IV or wave X.

Key momentum indicator RSI-14 period has given an upside crossover and entered into positive territory and MACD, too, has come into buy mode both on the daily and weekly charts which further confirms the trend reversal from down to up.

Investment Strategy

• Buy 1st lot at CMP 115 and 2nd lot at 101-96 levels target 147 then 170 with stop loss 86.
• Risk/return ratio: 1/2.5
• Risk Avg: 26875 (115+100/2= 107.5, 107.5-86= 21*1250 = 26875)
• Return Avg: 63125 (147+170/2=158, 158-107=51*1250 = 63125)