Comments
By May end, the continuous contract of crude oil on the Multi Commodity Exchange (MCX) picked up momentum and established a fresh leg of rally. Consequently, it breached the critical level of ₹5,000 in early June and hit a fresh high of ₹5,688 during the first week of July.
But by then, the contract had started developing signs of weakness – the relative strength index (RSI) developed a bearish divergence and the moving average convergence divergence (MACD) slowed down and the slope started to become flattish. Following this, the price declined.
After initially dropping to ₹5,300 level from the high of ₹5,688 early this month, the contract rebounded a bit. However, the rebound could not be sustained and the contract dropped after facing a barrier at ₹5,600. The sell-off accelerated and on Monday, the contract saw a substantial drop in price. The support at ₹5,300 was broken with ease as the flurry of shorts dragged the contract to ₹4,878.
Since ₹5,000 is a psychological level, the contract recovered after briefly trading below it. However, the price band of ₹5,300 and ₹5,340 is a strong hurdle and the likelihood of futures moving past these levels is low. Also, the RSI and MACD have turned bearish. So, traders can make use of the rally to short the contract. While ₹5,475 can be the stop-loss, the primary target can be ₹5,000 with subsequent target at ₹4,880.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.