The manufacturing and services activity in China, the largest oil importer, improved considerably in February. Interestingly, the manufacturing Purchasing Managers’ Index (PMI) was recorded at 52.6 for the last month, the highest since April 2012. This aided the crude oil prices to rally last week.

The Brent crude futures on the Intercontinental Exchange (ICE) posted a 3.6 per cent gain as it closed at $85.8 a barrel. Similarly, the MCX crude oil futures (March contract) gained 2.5 per cent and ended the week at ₹6,503 per barrel.

Rumours about the UAE exiting the OPEC spurred the volatility and weighed on the prices. Also, there was some pressure as the US crude oil stocks increased by 1.7 million barrels for the week ended February 24. However, this was short lived, and the Chinese data gave the bulls more fire power towards the end of the week.

Technically, the price action gives the energy commodity a bullish inclination. So, we might see the price going up further this week.

MCX-Crude oil (₹6,503)

The March crude oil futures extended the rally last week after rebounding from the support at ₹6,150 in the previous week. Despite a sharp intraday fall on Friday, the contract made a quick recovery from the low of ₹6,227.

Currently hovering around the important level of ₹6,500, the contract is likely to advance further. However, note that the broad price range of ₹6,000-6,750 is still valid. Therefore, the rally might be capped at the range top of ₹6,750.

If ₹6,750 is breached, we might see a rally towards ₹7,000 – a key barrier. Subsequent resistance is at ₹7,250. On the other hand, if the contract falls off the range top, we might see it gradually falling towards the support at ₹6,150 or ₹6,000. But before that, we will most probably see a rally to ₹6,750 from the current level.

Trading strategy: We had recommended long positions at ₹6,150 with initial stop-loss at ₹5,900. We had suggested to move the stop-loss to ₹6,300 when the contract rises above ₹6,500. But since the breach of ₹6,500 is not decisive, it is better to keep the stop-loss a little wider. That is, for the existing longs, alter the stop-loss to ₹6,200. Book profits at ₹6,700.