After registering a low of ₹2,594 in early November, the December futures contract of crude oil on the Multi Commodity Exchange (MCX) has been appreciating since then. As it moved up, it breached key resistances at ₹3,000 and ₹3,250.
Last week, the contract rallied past its prior peak of ₹3,449 and marked a fresh high of ₹3,522. Thus it continues to make higher highs and lies well above the 21-day moving average, maintaining the bullish momentum.
However, the job may not be very for the bulls as the indicators have started showing loss of momentum in uptrend. That is, the relative strength index, though staying in the positive territory, has turned flat and the moving average convergence divergence indicators on the daily chart, though in the bullish zone, has turned its slope flat after being positive in the past one month. Nevertheless, this does not mean a trend reversal.
If the bulls regain traction and goes above ₹3,500, it will most likely rally to ₹3,600. Above that level it can advance to ₹3,700. But if the uptrend loses steam further and results in a decline, the contract has a couple of support in quick succession i.e. ₹3,325 and ₹3,250. A breach of ₹3,250 can potentially turn the outlook negative and can drop to ₹3,100.
Though bulls seem to have slowed down, the major trend remains positive. So, traders can buy the contract with stop-loss at ₹3,325 if it breaks out of ₹3,500.