Commodity Analysis

Technical View: Outlook turns bleak for crude oil

Akhil Nallamuthu | Updated on March 08, 2020 Published on March 08, 2020

March contract of crude oil tumbled 7.8 per cent on Friday

For most part of the week, iCOMDEX, the composite index of the Multi Commodity Exchange (MCX), was advancing as prices of crude oil and gold went up. Crude oil and gold are the two major components of the index with 33 per cent and 17 per cent weight, respectively. But on Friday, the crude oil price slumped, and gold witnessed a correction and the index dropped to close at 9,783. However, on weekly basis, it was up as the preceding weekly close was at 9,505. Going forward, the index can moderate further as the outlook for crude oil is bearish.

MCX-Crude (₹3,159)

Last week, the price of March futures contract of crude oil at the Multi Commodity Exchange (MCX) went up. The contract was unable to rise beyond the resistance at ₹3,600, and on Friday the price crashed to make a low of ₹3,139 before closing the week at ₹3,159.

The price of ₹3,600 coincides with the 21-day moving average (DMA), making it a significant hurdle. The Moving Average Convergence Divergence (MACD) indicator on the daily chart is in the bearish territory and the daily Relative Strength Index (RSI) is below the mid-point level of 50.

Since the major trend is bearish and there are indications of further weakening of price, traders can short the contract with a stop-loss at ₹3,350. The nearest support is at ₹3,000 and below that level, it might decline to ₹2,875.

MCX-Gold (₹44,158)

 

The April futures contract of the yellow metal bounced from the 21-DMA and rallied during the past week; it registered a fresh high of ₹44,961 on Friday before closing the week at ₹44,158. The contract has been forming higher highs on the daily chart and the MACD indicator is exhibiting an upward bias. However, the daily RSI is near the over-bought levels, hinting at a possible bearish divergence.

On the upside, ₹45,000 is a considerable resistance. So, traders can consider fresh long positions with tight stop-loss if the contract moves past that level. Above ₹45,000, the contract can potentially rally to ₹45,700 and then ₹46,300. The nearest support levels from the current market price are ₹43,700 and ₹43,000.

MCX-Silver (₹46,969)

The May futures contract of silver began last week with a gap-up on the back of the support at ₹43,900. The contract then rallied and marked an intra-week high of ₹47,870 before closing the session at ₹46,969. The current price level coincides with both the 21- and 50-DMAs.

The daily RSI is showing a fresh uptick and has inched above the mid-point level of 50, but the MACD indicator on the daily chart is flat. Since the contract has a substantial resistance at ₹48,000, traders can buy with stop-loss at 46,000 if the price breaks out of ₹48,000 level. Potential hindrances on the upside are at ₹49,000 and ₹50,000, which can be the near-term targets. On the downside, ₹46,000 and ₹45,700 are the supports.

MCX-Copper (₹433.5)

The March futures contract of copper was trading flat during the last week. But towards the end, the price went up, eventually closing above the resistance at ₹430 and the 21-DMA, opening the door for further appreciation.

Substantiating the bullish bias, the daily RSI has gone above the mid-point level of 50 and the MACD indicator on the daily chart is hinting at a shift in momentum in favour of the bulls.

Though there are factors supporting the upward bias, ₹440 is a strong resistance and the price must breach that level for the rally to sustain. Hence, traders can buy the contract with stop-loss at ₹430 if it decisively breaks out of ₹440. The short-term targets can be ₹457 and ₹460.

NCDEX-Soybean (₹3,738)

The April futures of soybean in the National Commodities and Derivatives Exchange (NCDEX) were sluggish throughout the previous week. The contract is trading between ₹3,625 and ₹3,815, and unless it moves out of this range, the next leg of trend cannot be confirmed. The 21-day moving average coincides with the resistance at ₹3,815, making it stronger.

The MACD indicator on the daily chart is flat whereas the daily RSI has come up slightly, hinting at a potential bullish divergence. But the major trend remains bearish despite the recent sideways movement. Thus, traders can stay on the sidelines until either of ₹3,625 or ₹3,815 is breached. While ₹4,000 is the resistance above ₹3,815, support below ₹3,625 is at ₹3,480.

Published on March 08, 2020
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