Commodity Calls

MCX-Crude oil may be gearing up for a fresh rally

Gurumurthy K BL Research Bureau | Updated on March 20, 2019 Published on March 20, 2019

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Crude oil prices have been stuck in a narrow range over the last few days. The Crude oil futures contract on the New York Mercantile Exchange (NYMEX) has been stuck in the band between $57.5 and $59.5 per barrel for about a week. It is currently trading at $58.7 per barrel.

On the domestic front, the Crude oil futures contract on the Multi Commodity Exchange of India (MCX) has been stuck in a narrow range between ₹3,975 and ₹4,085 per barrel. The contract is currently trading at ₹4,062 per barrel.

The price action on the chart leaves the near-term outlook negative for the NYMEX-Crude oil contract. The contract seems to be struggling to breach the key 50 per cent Fibonacci retracement resistance level of $59.5. As long as the contract trades below this hurdle, there is a strong likelihood of it declining to $57 or $56 in the near term. But a further fall below $56 looks less probable at the moment.

The contract may remain range-bound between $56 and $59.5 for some time. An eventual break above $59.5 will then pave the way for a fresh rally to $61 and $62 over the short term.

On the other hand, the contract is looking relatively stronger than the NYMEX contract. It has key supports in the range between ₹3,975 and ₹3,900. A fall below ₹3,900 looks unlikely at the moment.

The indicators on the charts are also positive. The 55-day moving average is on the verge of crossing over the 100-day moving average. This is a bullish signal indicating that the downside could be limited.

The level of ₹4,125 is a crucial resistance. A strong break above it will boost the bullish momentum. Such a break will increase the likelihood of the contract rallying to ₹4,350 and ₹4,400 in the coming weeks.

Trading strategy

Traders with a medium-term perspective can go long at current levels and accumulate at ₹4,010 and ₹3,990.

A stop-loss can be placed at ₹3,880 for the target of ₹4,350. Revise the stop-loss higher to ₹4,150 as soon as the contract moves up to ₹4,225.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

Published on March 20, 2019

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