Crude oil prices dropped sharply last week. The Brent crude oil futures on the Intercontinental Exchange (ICE) was down 4.3 per cent and ended the week at $71.5 per barrel. Similarly, the crude oil futures on the MCX lost 4.7 per cent as it closed the week at ₹5,694 a barrel.

Brent futures ($71.5)

Brent Crude futures, failing to break out of $75, saw a sharp decline over the past week. However, on Friday, it closed above the key support at $70.

If Brent Crude futures recovers and rallies past $75, it can extend the upswing to $80. On the other hand, if the contract drops below the support area of $68-70, it can depreciate to $62.

MCX-Crude oil (₹5,694)

The October crude oil futures fell off the resistance at ₹6,000 last week. It is currently hovering around a support at ₹5,700. Support below ₹5,700 is at ₹5,500.

In case the bears gain enough strength to drag the crude oil futures below ₹5,500, it will potentially open the door for a fresh leg of downtrend to ₹5,000. But as it stands, this is less likely to happen.

If the contract starts to recover and move above ₹6,000, the near-term outlook can turn bullish. In this case, crude oil futures can rally to ₹6,500 and then possibly to ₹6,800.

Trade strategy: Traders with higher risk appetite can buy crude oil futures now at ₹5,694 and place stop-loss at ₹5,420. When the contract moves above ₹6,000, revise the stop-loss to ₹5,800. When the contract rises to ₹6,300, tighten the stop-loss to ₹6,100. Exit at ₹6,500.

Risk averse traders can wait for the breakout of ₹6,000 and then go long. Target, stop-loss and the adjustments can be as mentioned above.

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