Crude oil prices witnessed a volatile week as the price declined in the first half and rallied in the later half. However, it could not recover all the losses it had made and ended the week with a loss.
The Brent crude futures on the Intercontinental Exchange (ICE) was down 0.4 per cent as it ended the week at $84.5 a barrel. The MCX crude oil futures (September contract) depreciated 3.3 per cent as it closed at ₹6,503 per barrel on Friday.
Strong dollar weighed on the energy commodity. However, the US inventory data pushed the prices up in the last two days as it hinted at better consumption. According to the Energy Information Administration (EIA), the crude oil stocks in the US shrunk 6.1 million barrels versus the expected drop of 2.9 million barrels for the week ended August 18.
That said, the chart shows that the crude oil prices might stay in a sideways trend in the near term.
MCX-Crude oil (₹6,503)
The September futures of crude oil declined to mark an intraweek low of ₹6,425 on Thursday before recovering towards the end of the week. This would have triggered the stop-loss at ₹6,425 for the longs that we suggested last week.
As it stands, the trend has not turned bearish. On the other hand, the price action hints at a loss in momentum. Therefore, there is a chance that crude oil futures might move sideways before establishing the next leg of trade.
The possible price levels within which the contract is likely to consolidate are ₹6,400 and ₹7,000. If the resistance at ₹7,000 is breached, we might see another leg of uptrend, possibly to ₹7,600. But if the contract falls below ₹6,400, the downside could extend to ₹6,125 or to ₹6,000.
Trade strategy: Since the contract is now trading near the bottom of the possible range, the risk-reward is favourable for longs. Also, the broader trend is bullish.
So, one can go long now at around ₹6,500 with a stop-loss at ₹6,250. Exit at ₹6,900.