Crude oil extended the rally into the second week as they gained over the last week. Brent crude oil futures on the Intercontinental Exchange (ICE) was up 1.6 per cent, as it closed at $83.5 per barrel. Crude oil futures on the MCX gained 1.7 per cent by ending the week at ₹6,482 a barrel.

Brent futures ($83.5)

Brent futures, which appeared largely flat in the first half, gained in the second half of last week. But it is facing a resistance at $84. The contract has fallen off this level several times since November last year.

If this repeats, we could see a fall from here. But it is likely to be limited to $81, a support. If this level is breached, we can see the downtrend extending to $78.

On the other hand, if Brent crude futures breaks out of the barrier at $84, it can intensify the rally and lift the price to $90, its nearest resistance, quickly.

MCX-Crude oil (₹6,482)

The March futures contract of crude oil saw a decline last week. But it found the 20-day moving average support at ₹6,290 and rebounded quickly.

Now, the resistance at ₹6,520 is blocking the bulls. If there is a fall from the current level, possibly triggered by a decline in international crude prices, ₹6,290 will offer support. If this is invalidated, we could see the price dropping to ₹6,100.

On the contrary, if crude futures go past the resistance at ₹6,520, it can establish another leg of uptrend, which can potentially lift the price to ₹6,800 or even to ₹7,000 in a short span of time. Resistance above ₹7,000 is at ₹7,200.

Trade strategy: Stay on the fence and buy crude oil futures if it breaks out of ₹6,520. Place stop-loss at ₹6,300 at first. When the contract touches ₹6,800, tighten the stop-loss to ₹6,625. Book profits at ₹6,950.