Crude oil prices ended almost flat last week. Brent crude oil futures on the Intercontinental Exchange (ICE) was down 0.2 per cent by closing at $82.7 per barrel. Crude oil futures on the MCX posted a marginal gain of 0.1 per cent by ending the week at ₹6,551 a barrel.
Brent Crude futures ($82.7)
Brent Crude futures is trading within a range of $81-84. This is the price band within which it was oscillating between mid-February and mid-March. So, the next leg of trend will depend on the direction of the breach of this range.
A breakout of $84 can lift the contract back to $90. If this is breached, the contract can extend the upswing to $96. On the other hand, if Brent crude futures slip below the support at $81, it might decline to $77, a support. Note that $76-77 is a support band.
MCX-Crude oil (₹6,551)
Crude oil futures (May expiry) made an intraweek low of ₹6,434 in the middle of last week before a recovery. But on a weekly basis, it almost closed on a flat note.
The contract remains above the important support at ₹6,400 and as long as it remains so, the probability of a rally will be high. From the current level, the nearest resistance levels are at ₹6,800 and ₹7,000. Subsequent resistance is at ₹7,250.
But if crude oil futures break below the support at ₹6,400, the outlook can turn bearish. In such an event, the contract can depreciate to ₹6,000 and then possibly to ₹5,850.
Trade strategy: We suggested buying May crude oil futures at an average price of ₹6,775. Hold this trade with a stop-loss at ₹6,300.
When the contract recovers and moves past ₹6,800, alter the stop-loss to ₹6,500. On a rally above ₹7,000, modify the stop-loss to ₹6,500. Book profits at ₹7,250.