Crude oil posted strong gains last week. The Brent crude futures on the Intercontinental Exchange (ICE) was up 6.5 per cent as it closed the week at $79.9 a barrel, whereas the MCX crude oil futures (April contract) gained 8.2 per cent as it ended the week at ₹6,199 per barrel.

Major push came from the positive Chinese PMI data. Both manufacturing and non-manufacturing PMI posted expansion in February. This lifted the prices on hopes of considerable demand from China — the biggest crude oil consumer in the world. Besides, the crude oil inventory in the US declined by 7.5 million barrels against the expected increase of nearly 2 million barrels, shows data from the Energy Information Administration.

On the technical front, despite the rally, crude oil is below a key resistance, which can be tested this week.

MCX-Crude oil (₹6,199)

The April futures of crude oil rallied above the 20-day moving average last week. While the recovery looks sharp, the contract faces an important resistance at ₹6,300. The 50-day moving average also lies at ₹6,300 making it a strong one.

If the contract reverses lower on the back of the barrier at ₹6,300, it can fall towards ₹6,000 this week. Support below ₹6,000 can be spotted at ₹5,750 and ₹5,550.

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On the other hand, if the crude oil futures surpass ₹6,300, it can turn the trend bullish. This can lead to a rally to ₹6,500 or even to ₹6,750 quickly.

Trade strategy: A fortnight ago, we recommended short positions at ₹5,900 with stop-loss at ₹6,300. Although the probability of the contract hitting the stop-loss this week is higher compared with the last week, traders can retain this trade, because the barrier at ₹6,300 is strong.

In case the contract resumes the fall and slips below ₹5,750, tighten the stop-loss to ₹6,000. Book profits at ₹5,500. Note that we have revised the target up from ₹4,850 to ₹5,500 as the price action is not as weak as it was a couple of weeks ago.

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