The continuous futures contract of crude oil on the Multi Commodity Exchange of India (MCX) has advanced about 2 per cent to trade at around ₹5,112 per barrel on Wednesday.
Since its November 2020 low of ₹2,540, the contract has been in an intermediate-term uptrend. However, it had met with a key resistance at ₹5,733 in early July this year and began to trend downwards. Since then, it has been in a medium-term downtrend.
But the contract found support at ₹4,634 in late August and started to trend upwards. Over last two weeks, the contract has been range-bound between ₹4,965 and ₹5160. With positive bias, the contract now faces resistance at ₹5,160.
An emphatic breakthrough of this barrier will weaken the downtrend and take the contract northwards to ₹5,300 and then to ₹5,400 in the ensuing weeks. A further break above ₹5,400 will reinforce the bullish momentum and strengthen the intermediate-term uptrend.
In that scenario, the contract has potential to trend upwards to ₹5,500 and then to ₹5,600 over the medium term. Traders should await and take fresh long positions above ₹5,160 levels with a fixed stop-loss.
On the other hand, a decisive fall below the immediate support level of ₹4,965 will keep the downtrend intact and can pull the contract down to ₹4,900 and then to ₹4,800 levels over the short term. Key supports thereafter are at ₹4,700 and ₹4,600 levels.