Crude oil, which was looking for direction after being stuck in a range, was provided with one last week. The trigger being the banking crisis which started with the collapse of the Silicon Valley Bank (SVB). This led to a sharp drop in prices of the energy commodity over the past week.

The Brent crude futures on the Intercontinental Exchange (ICE) tumbled 12.4 per cent to close the week at $72.5 a barrel. Whereas the MCX crude oil futures (April contract) slumped 11.9 per cent and ended the week at ₹5,584 per barrel.

Therefore, technically, the bear trend has resumed, and we are likely to see further drop in prices.

Brent futures ($72.5)

The Brent futures has slipped below the lower boundary of the range of $76-90, within which it has been trading since December last year. Notably, the trend preceding this sideways movement was bearish. Thus, last week’s breach of $76 denotes that the bear trend has resumed after a break.

From the current level of $72.5 the nearest support can be seen at $65. Nevertheless, given the current momentum, the contract will, most likely, decline below this and extend the fall, potentially to $58. That said, there might be a corrective rally, possibly towards the price band of $78-80 before we see the next leg of downtrend.

MCX-Crude oil (₹5,584)

The April futures of crude oil witnessed a large drop in price last week. Bears dragged the contract below the support zone of ₹6,000-6,150 with ease. The contract found a little bit of relief as the support at ₹5,550 managed to stop the fall, at least temporarily.

Going forward, we might see a corrective bounce, which can take the price towards the support-turned-resistance region of ₹6,000-6,150. But there is also a chance for the crude oil futures to start falling right away once the session opens on Monday.

In the coming weeks, the price could dwindle to ₹4,850. Below that lies a significant support at ₹4,550. Thus, the price area of ₹4,550-4,850 is a broad demand zone from where we might see a rebound in price. Whether that will lead to a bullish reversal or not is something to wait and watch.

Trade strategy: As the trend is clearly bearish, traders can consider short positions. But since ₹5,550 is a support and there might be a corrective rally from here, we suggest staying on the fence for now.

Go short when price inches up to ₹5,800. Add more shorts if the contract goes further up to ₹6,000. Place stop-loss at ₹6,300. After initiating short, when the price slips below ₹5,500, tighten the stop-loss to ₹5,850. Further, when the contract goes below ₹5,200, alter the stop-loss to ₹5,550. Book profits at ₹4,850.

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