Commodity Analysis

Bullish breakout in crude oil futures

Akhil Nallamuthu | Updated on December 15, 2019 Published on December 15, 2019

The January futures contract of crude oil breached the key resistance at ₹4,220

MCX COMDEX, the composite commodity index of the Multi Commodity Exchange (MCX), is moving upwards following an uptick in crude oil price. Crude oil is the largest component of the index with 33.2 per cent weight. Gold, the second-largest component, continues to move sideways. So, the index is expected to appreciate in the near term as the short-term outlook for crude oil is positive.

MCX-Crude (₹4,244)

After consolidating within a range throughout the week, the January futures contract of crude oil broke out of the range top at ₹4,220 on Friday and closed at ₹4,244. This opens the door for further appreciation in the coming days. The resistance was significant as the 61.8 per cent Fibonacci retracement level of the previous bear trend coincided at that level. Moreover, though the contract was range-bound, it remained above the 21-day moving average, keeping the short-term outlook positive.

Hence, traders can initiate fresh long positions and place the stop-loss at ₹4,115 with the potential target at ₹4,327. Above that level, the contract might even appreciate to ₹4,500.

MCX-Gold (₹37,773)

Gold prices continue to consolidate, and as a result, the February futures contract of the yellow metal is oscillating between ₹37,500 and ₹38,325. Thus, the broader range between ₹37,500 and ₹38,950 is still valid. Hence, traders are advised to wait until the price moves out of the range.

If the contract breaks out of the upper limit of the range at ₹38,950, the price can advance to ₹40,000. Above that level, the resistance is at ₹40,800. However, if the contract breaks below the lower limit of the range at ₹37,500, it may face considerable selling pressure, depreciating to ₹36,380. Below that level, there is a support band between ₹35,110 and ₹35,335.

MCX-Silver (₹44,126)

Though the march futures contract of silver broke down from the range, it did not weaken further. Instead, the price inched up during the past week after registering a low of ₹43,406, and the contract is hovering around ₹44,240, ie, the lower boundary of the earlier range. However, the metal can be approached with a bearish bias because it is trading below both the 21- and 50-DMAs.

But from the perspective of trading, it is recommended to sell only if the contract falls below ₹43,406, as there are chances for it to consolidate at the current level. The stop-loss for the short position can be at ₹45,650 with a target of ₹39,500.

MCX-Copper (₹440)

The December futures contract of copper extended its rally and appreciated in the past week. But on Friday, the contract declined and closed at ₹440, giving up the entire weekly gain. However, the price action shows bullish bias along with the daily relative strength index (RSI). Also, the moving average convergence divergence indicator, in the positive territory, is exhibiting positive outlook. As the 50-day moving average falls at ₹443, it can act as a resistance. Thus, traders can wait for a daily close above that level and then initiate fresh long positions. The stop-loss for longs can be at ₹435, and look for a target of ₹450. Above ₹450, the contract has the potential to rise to ₹460.

NCDEX-Soyabean (₹4,202)

The January futures contract of soyabean had a sluggish opening. However, it managed to close above an important level of ₹4,200 despite declining on Friday. Though the daily RSI is trading near the over-bought levels, the price action indicates good bullish momentum. This is also corroborated by the moving average convergence divergence indicator, as it remains in the positive territory.

Traders can continue to hold bullish bias until the contract stays above the critical support at ₹4,100. Rather than buying at the current levels, fresh long positions can be created if the price softens to ₹4,155 with a stop- loss at ₹4,090. The short-term target can be at ₹4,275.

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Published on December 15, 2019
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