Commodity Analysis

Crude oil faces crucial resistance at ₹3,100

Akhil Nallamuthu | Updated on July 12, 2020 Published on July 12, 2020

The Indian commodities market was positive last week as the major commodities witnessed a rally, resulting in the iCOMDEX, the composite index of the Multi Commodity Exchange (MCX), gaining about 3 per cent. Though crude oil and gold contribute the most, it was zinc and copper (weighing a little over 13 per cent together) that helped lift the index.

As the market sentiment appears bullish for the commodity market, the index might gain further.

MCX-Crude (₹3,043)

The July futures of crude oil on MCX was sluggish last week as it was trading in a narrow range. Yet, the price stays above the 21-day moving average (DMA). However, the contract cannot be expected to establish the next leg of rally unless it breaches the important hurdle at ₹3,100.

While the moving average convergence divergence (MACD) in the daily chart is signalling a bearish bias, the daily relative strength index (RSI) is flat as the price is not trending.

Considering these factors, traders can stay on the fence and initiate fresh long positions with a stop-loss at ₹3,000 if the price breaks out of ₹3,100. The resistances above ₹3,100 are at ₹3,250 and ₹3,340.

MCX-Gold (₹48,863)

The August futures of gold on MCX bounced from the 21-DMA support and rallied past the resistance of ₹48,600.

While it registered a fresh high of ₹49,348 on Wednesday, it was unable to breach the psychological level of ₹50,000. However, the contract retains the bullish bias as the price action continues to form higher peaks.

The contract can be bullish until the price is above the 21-DMA and so the intermittent dips can be considered as fresh entry points in the buy side.

Also, the daily RSI is in the bullish region and the MACD indicator is above the zero level, indicating an upward bias. Hence, traders can buy the contract on declines with a stop-loss at ₹47,650.

While ₹50,000 is the nearest resistance, a breakout of that level can take the contract to ₹50,500.

MCX-Silver (₹51,362)

Like gold, the price of silver went up last week. The September futures of silver on MCX broke out of the key resistance of ₹50,000, opening the door for further strengthening.

It registered a fresh high of ₹52,144 before ending the session at ₹51,362.

Even though ₹51,700 can act as a hurdle, the contract will likely move past that level as the momentum is in its favour.

Following the breakout, the daily RSI is showing a fresh uptick and lies above the midpoint level of 50. The MACD indicator in the daily chart is in an upward trajectory. So, traders can be bullish and initiate fresh long positions on declines with a stop-loss at ₹49,000.

On the upside, ₹51,700 might act as a minor hurdle, above which the contract could rally to ₹53,000.

MCX-Copper (₹494.1)

The July futures of copper on MCX rallied sharply and broke out of the resistance at ₹470; it then went on to register a fresh high of ₹495.2. Substantiating the bullish bias, the daily RSI is rising in tandem with the contract and stays deep in the bullish zone. The MACD indicator in the daily chart, too, indicates a considerable bullish momentum.

But rather than initiating fresh long positions at current levels, traders can either buy with a stop-loss at ₹490 if the price rallies past ₹500, or buy with a stop-loss at ₹480 if the price moderates to ₹490. Rather than a fixed level, one can adopt a dynamic stop-loss.

That is, after initiation of the trade, move the stop-loss higher with a gap of 1.5 times the average daily true range as the contract moves up.

NCDEX-Soybean (₹3,742)

The July futures of soyabean on the National Commodities and Derivatives Exchange (NCDEX) charted a narrow sideways trend last week. Thus, the contract continues to be held between two important levels of ₹3,700 and ₹3,850. But there are bearish indications from the RSI and the MACD in the daily chart — both remain in their bearish territory.

However, the contract has a strong support at ₹3,700, and until the price stays above that level, the bearish trend cannot be confirmed.

So, traders can sell the contract if it decisively breaks below the support of ₹3,700. The stop-loss can be at ₹3,800.

On the downside, ₹3,600 and ₹3,550 are the potential support levels.

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Published on July 12, 2020
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