The price of crude oil has been rallying strongly since the beginning of 2022. Thus, the continuous contract of the energy commodity on the Multi Commodity Exchange (MCX), which closed 2021 at ₹5,625, has gained about 16 per cent and is currently hovering around ₹6,550.

While it faced a minor price correction in the last week, the price band of ₹6,160 – ₹6,240 provided support against which the contract resumed the rally. On Thursday, it crossed over the prior high of ₹6,480, opening the door for further strengthening in price.

Corroborating the bullish inclination, the relative strength index (RSI) and the moving average convergence divergence (MACD) on the daily chart are showing bullish signs.

Also, the cumulative open interest of all active crude futures contract on the MCX has seen a considerable increase – it stood at 11,270 contracts compared to 6,909 contracts by the end of December. Thus, the rally is accompanied by fresh build-up in OIs indicating a long build-up.

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The contract is likely to see further appreciation, potentially touching ₹6,800 in the short-term and might even rally to ₹7,000 over the medium-term.

But there are chances for the price to dip to ₹6,350 before scaling new heights. So, traders can buy at current levels and accumulate if the contract moderates to ₹6,350. Place stop-loss at ₹6,120. When it reached ₹6,800, liquidate half of the longs and revise the stop-loss to ₹6,580. Exit the leftover at ₹6,980.

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