Comments
Crude oil prices, which were already on a rise last week, got a further boost on Friday as Russia announced a 5 per cent cut in their production in March. This means, the supply from Russia will drop by about 500,000 barrels a day next month.
The Brent crude futures on the Intercontinental Exchange (ICE) rose 8.5 per cent and closed at $86.5 a barrel. Similarly, the MCX crude oil futures (February contract) appreciated 7.5 per cent and closed the week at ₹6,556 per barrel.
Brent futures ($86.5)
The Brent futures found support at $80 and rallied. But from the current level, there is a resistance near-by at $88. The price action on the daily chart shows that the contract is likely to form a range between $78 and $88, and remain within these levels in the near term. The direction of break of this range will determine the next leg of trend.
MCX-Crude oil (₹6,556)
The February futures of crude oil on the MCX rebounded from the support at ₹6,000 last week. It rallied and managed to close above ₹6,500. This indicates of good positive momentum. However, the contract is facing a critical roadblock at ₹6,750. Unless this level is decisively breached, it may not be ideal for us to assume a bull trend.
Moreover, last week’s movement was more of a short-covering rally. Although we cannot neglect this as a positive sign, a breach of ₹6,750 coupled with fresh long build-up will only significantly increase the chances of a rally to higher levels.
That said, the chart indicates that the contract might stay within the broad range of ₹6,000-6,750. Until then, traders can prefer range trading strategies.
Trading strategy: The revised stop-loss at ₹6,500 for the shorts that we recommended would have hit last week. Traders can stay away for now. Initiate fresh shorts when the contract touches ₹6,750 as the chart shows a potential horizontal trend between ₹6,000 and ₹6,750. Target and stop-loss for this can be at ₹6,150 and ₹6,925, respectively.
If the stop-loss of this short is hit and if the contract sees a daily close above ₹6,750, consider long positions. That is, buy crude oil futures with stop-loss at ₹6,500 for a target of ₹7,400.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.