Crude prices saw a decline last week. The Brent crude oil futures on the Intercontinental Exchange (ICE) ($74.40/barrel) dropped 0.3 per cent. Similarly, the crude oil futures on the MCX (₹6,148/barrel) posted a gain of 0.3 per cent.
Brent futures ($74.40)
Brent crude oil futures fell off the resistance at $77. However, the contract managed to close above the support at $74. The prevailing price action shows that the contract consolidates between $74 and $77.
The direction of the breach of the $74-77 range will give us cues about the direction of the next leg of trend. A breakout of $77 can turn the outlook positive where the price can rise to $82. But if the support at $74 is breached, the contract can slip to $71.
MCX-Crude oil (₹6,148)
The March crude oil futures saw its price go up last week until Thursday. However, on Friday, there was a sharp drop in price. Consequently, the contract gave away most of the gains and closed marginally higher.
Crude oil futures faced resistance at ₹6,300 where a falling trendline coincided. As it stands, the price action shows a bearish tilt. So, there is a chance for the price to decline to ₹6,000, a notable support.
On the other hand, if the contract recovers and moves past ₹6,300, it will face a barrier at ₹6,550. A breakout of ₹6,550 can turn the outlook positive. Notable hurdles above ₹6,550 can be seen at ₹6,800 and ₹7,000.
Trade strategy: Retain the short position we suggested to initiate at ₹6,300. But alter the stop-loss from ₹6,400 to ₹6,300. Book profits at ₹6,000.
What traders should be careful about is how Brent crude oil prices move. Since it is hovering near a support, there is a chance for a rally. Such an upswing can also trigger an up-move in MCX crude oil futures too. So, stick to stop-loss strictly.