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The crude oil prices fell over the last week because of the fears of a fast paced tightening from the US Fed. Even though better-than-expected US jobs lifted the price on Friday, the energy commodity produced a weekly loss.
The Brent crude futures on the Intercontinental Exchange (ICE) posted a 3.6 per cent loss as it closed at $82.8 a barrel. Similarly, the MCX crude oil futures (March contract) declined 3.1 per cent and ended the week at ₹6,299 per barrel.
Technically, there is no clear trend and thus, the outlook remains unclear.
Brent futures ($82.8)
Although the Brent futures declined last week, it stays within the broad range of $76-90. But since the final week of January, the contract has been forming higher lows and lower highs — the price action is compressing, resembling a triangle pattern.
Until the contract moves out of this pattern or the above-mentioned price range, we might see some erratic moves. That said, the nearest support and resistance are at $80 and $86 respectively.
MCX-Crude oil (₹6,299)
Unable to sustain above the key level of ₹6,500, the March crude oil futures declined to post a weekly loss of 3.1 per cent. Nevertheless, this time too, the support at ₹6,150 helped the bulls to fight back and gain some ground. Notably, the price band of ₹6,000-6,150 is a support band against which the contract has rebounded several times since the beginning of this year.
However, further rally from here can be difficult as the contract faces a series of resistances. The 20- and 50-day moving averages lie at ₹6,400 and ₹6,440 respectively, which are potential barriers. Just above these levels, there is a falling trendline resistance. The contract is expected to meet this trendline at around ₹6,500, which is already a considerable hurdle.
Therefore, the contract should breach either the resistance at ₹6,500 or the support at ₹6,000 for us to reasonably predict the next leg of trend. Supports below ₹6,000 are at ₹5,850 and ₹5,550, whereas resistance above ₹6,500 are at ₹6,750 and ₹7,000.
Trade strategy: The crude oil futures fell short of our target for the longs at ₹6,700 as the contract fell after making an intra-week high of ₹6,583. It then hit our trailing stop-loss at ₹6,200. The trade was initiated at ₹6,150.
Given the prevailing conditions, we recommend traders refrain from trading crude oil.
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