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The crude oil futures contract (₹5,127 per barrel) has been on a strong downtrend since the last week of October. This fall has found support just above ₹4,700 and the contract is attempting to bounce-back. The region between ₹4,750 and ₹4,700 will be a good near-term support.
As long as the contract sustains above this support zone, a corrective rise to ₹5,500-5,600 cannot be ruled out. A break above the immediate resistance at ₹5,250 can trigger this rise. However, the broader trend will continue to remain down.
As such the MCX crude oil futures contract is likely to reverse lower again anywhere from the ₹5,500-5,600 resistance region. In that case, the contract can fall-back to ₹4,700 and can even break below it. A break below ₹4,700 can take the contract down to ₹4,550 initially and then to ₹4,300-4,200 eventually.
Traders can wait for a rise and go short at ₹5,350 and ₹5,550. Keep the stop-loss at ₹5,720. Trail the stop-loss down to ₹5,150 as soon as the contract moves down to ₹4,850. Move the stop-loss further down to ₹4,825 when the contract touches ₹4,720. Book profits at ₹4,620. The bearish outlook will get negated only if the contract breaks above ₹5,600 decisively. Such a break will then pave way for a further rise to ₹5,800-6,000 thereafter.
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