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The continuous futures contract of crude oil on the Multi Commodity Exchange (MCX) has been rising since April 2020 in tandem with global oil prices. While there was a price correction in March this year, it was not very significant. However, after hitting a fresh high of ₹5,733 in July, the contract declined to ₹4,630 levels in August.
Since the price area of ₹4,580 and ₹4,630 acted as a support band, the contract started to recover from this level. What appeared to be a shift in medium-term bearish reversal initially was nullified as the bulls steadily gained traction. The contract crossed over ₹5,000 and on Monday this week, it broke out of ₹5,500, increasing the likelihood of further rally. The short-term trend can be bullish until the price remains above ₹5,000.
Substantiating the bullish outlook, the relative strength index (RSI) and the moving average convergence divergence (MACD) on the daily chart are in their respective bullish zone.
Given the prevailing conditions, traders can go long at current level of ₹5,500 and add more if price declines to ₹5,360 – an important support. Stop-loss can be placed at ₹5,130.
The contract is expected to touch ₹6,000, which can be the target for the longs.
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