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The crude oil futures contract on the New York Mercantile Exchange (Nymex) tumbled over 12 per cent from $66 per barrel to $58 this February. This fall was short-lived. The contract, however, has reversed higher from this low and is hovering at $66 levels once again.
A crucial resistance is poised near current levels for the Nymex-Crude oil contract. Whether it manages to surpass this hurdle or not will decide the next move.
On the domestic front, the crude oil futures contract on the Multi Commodity Exchange (MCX) fell in tandem with the Nymex prices. The MCX Crude oil contract also tumbled 12 per cent from ₹4,200 per barrel to a low of ₹3,700. The domestic contract has reversed higher from this low and has recovered all the loss incurred in February and is currently trading at ₹4,270/barrel.
Outlook
The Nymex Crude oil contract has a crucial resistance at $67 — the 50 per cent Fibonacci retracement level. This hurdle had halted the rally in the contract earlier in February and triggered a fall. But the subsequent price action on the chart suggests that the Nymex contract is likely breach above $67 in the coming days. Such a break will take the contract higher to $70 initially. Further break above $70 will then increase the likelihood of the contract extending its rally to $73 or even $75 over the medium-term.
On the other hand, if the contract reverses lower from $67, it can fall to test the intermediate supports at $64 and $63. While the contract trades below $67, a range-bound move between $60 and $67 is possible. However, the bias will continue to remain positive for the oil prices to break above $67 eventually.
On the domestic front, the MCX Crude oil futures contract has a key resistance at ₹4,400 per barrel. A test of this resistance is likely in the near- term. A strong break above ₹4,400 will take the contract higher to ₹4,600 or ₹4,700.
Support for the contract is in the ₹4,200-₹4,100 region which is likely to limit the downside if the contract reverses lower from ₹4,400 in the coming days.
High-risk appetite traders with a medium-term perspective can go long at current levels and accumulate at ₹4,150. Stop-loss can be placed at ₹3,950 for the target of ₹4,700. Revise the stop-loss higher to ₹4,350 as soon as the contract moves up to ₹4,480.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.
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