Crude oil prices appreciated last week. Brent crude oil futures on the Intercontinental Exchange (ICE) gained 2.3 per cent as it closed at $78.8 per barrel. Crude oil futures on the MCX was up 2 per cent by ending the week at ₹6,128 a barrel.
Brent futures ($78.8)
Brent futures made a low of $74.8 mid-week, but then recovered and posted a weekly gain by closing at $78.8 on Friday versus the preceding week’s close of $77.
However, the trend has not turned bullish. The contract should decisively breach $80 in order to establish a sustainable rally. The 50-day moving average coincides with $80, making it a strong barrier.
A breakout of $80 can lead to a quick rally to $83 or even to $85. On the other hand, if the contract declines, it can find support at $76 and $73. Although the trend has not turned bullish, the chart shows that the bears are losing their grip.
MCX-Crude oil (₹6,128)
The January futures contract of crude oil made a low of ₹5,796 last Wednesday. But then, it recovered to the current level of ₹6,128.
The chart shows that the contract is trying to form a higher low, indicating that the bears are losing traction. However, crude oil futures should break out of ₹6,300 decisively to call it a bullish reversal.
Resistance above ₹6,300 can be seen at ₹6,600 and ₹6,800.
On the downside, the nearest support is the price region between ₹5,750 and ₹5,800. Subsequent support is at ₹5,500.
Trade strategy: Since there is no bullish confirmation yet, hold the shorts initiated at ₹6,105. Retain the stop-loss at ₹6,350.
But revise the target upside from ₹5,550 since the downtrend appears to be losing momentum. Book profits at ₹5,800.