Comments
Crude oil prices have begun the year with a bang. The crude oil futures contract on the New York Mercantile Exchange (Nymex) was up about 2.5 per cent and was trading around $55 per barrel on Tuesday, in the first trading day of the year.
The US markets were closed on Monday on account of the New Year holiday.
The oil prices have been on a strong surge after recording a multi-year low at around $26 in February 2016.
The rally got a boost from the Organization of Petroleum Exporting Countries’ (OPEC) agreement in November to cut the production for the first time in eight years.
This move aided the Nymex crude oil contract to breach above the psychological level of $50 per barrel in early December and also sustain above it.
The OPEC had cut the production by 1.2 million barrels per day (bpd) with effect from January1, 2017.
As the agreement has come into effect from this week, the oil prices are getting further boost. So here we take a look at what the charts says on where the prices are headed.
Price outlook
The strong rally beyond $50 has wiped out the threat of any sharp fall in the prices.
Also the Nymex weekly chart suggests that strong buying interest is emerging at around $50 which makes this psychological level a strong support.
The contract has now broken above a key near-term resistance at $54. A rise to $57.2 — the 38.2 per cent Fibonacci retracement resistance — is possible in the short-term.
A strong break above $57.2 can take the contract further higher to $59 or even to $62.
Strong resistance is in the $59-$62 region which may cap the upside for some time. If the prices manages to breach above $62, which may not happen immediately, can take the prices higher to $66 and $67 in the medium-term.
On the domestic front, the MCX crude oil futures contract has surged 3.3 per cent this week and is trading around ₹3,770 per barrel.
The Indian rupee weakening against dollar is also supporting the upmove in the MCX contract.
A strong resistance-turned-support is at ₹3,560 which may limit the downside in the short-term.
A rally to ₹4,000 or ₹4,100 looks likely in the coming weeks. A near-term corrective fall from the ₹4,000-₹4,100 resistance zone cannot be ruled out.
However, a subsequent strong break above ₹4,150 will pave way for a rise to ₹4,300 and ₹4,350.
Investors with a medium-term perspective can go long at current levels.
Stop-loss can be placed at ₹3,475 for the target of ₹4,225. Revise the stop-loss higher to ₹3,850 as soon as the contract moves up to ₹4,000.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.