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The continuous contract of crude oil on the Multi Commodity Exchange (MCX), which had rallied between November 2020 and July this year, turned southwards.
The uptrend that began from about ₹2,540 extended until the futures marked a fresh high of ₹5,733 in early July after which the price started to moderate.
Consequently, it marked a low of ₹4,634 in mid-August, thereby losing nearly 20 per cent from the July high. The contract then bounced off the lows but faced a hurdle at ₹5,150.
Since the past two weeks, the futures has been moving flat and the recovery was blocked by resistance at ₹5,150.
On Monday, the contract broke out of ₹5,150, hinting that recovery is set to continue.
It has been able to sustain above this price level and the price is now above the 50-day moving average (DMA), which also lies at ₹5,150, making the latest breakout significant. Substantiating the positive inclination, the relative strength index (RSI) entered the bullish zone this week and the moving average convergence divergence (MACD) is on the verge of entering the positive territory.
Traders can consider going long on crude oil futures on the MCX. Stop-loss can be placed at ₹5,100 and consider shifting it upwards with a gap of 1.5 times the average true range (ATR) as and when the contract rallies.
The contract is likely to touch ₹5,400 and ₹5,500 in the short-term.
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