Crude oil managed to end higher last week. The Brent crude oil futures on the Intercontinental Exchange (ICE) ($72.20/barrel) was up 2.2 per cent. Whereas the crude oil futures on the MCX (₹5,900/barrel) gained 1 per cent.
Brent futures ($72.20)
Brent crude oil futures has now moved above the 20-day moving average. While this by itself does not indicate a bullish trend reversal, this can be one of the first indications of a potential rally.
That said, the contract is almost at the centre between two important levels of $69 and $75. So, at this juncture, the probability of a rally and a fall is the same, leaving us with uncertainty with respect to the next leg of trend.
Resistance above $75 is at $81 and nearest support below $69 is at $62.
MCX-Crude oil (₹5,900)
The April crude oil futures has been consolidating for a while. Over the past three weeks, it has been stuck within ₹5,750 and ₹5,940. The direction of the breach of this price band will lend us clues about the next leg of trend.
That said, just above ₹5,940 is the key ₹6,000-mark, which can block the rally. If the contract breaks out of ₹6,000, it can rise to ₹6,200 and ₹6,500.
On the other hand, if the crude oil futures breaches the support at ₹5,750, it can drop to ₹5,500 quickly. This is a considerable support. A break below this level can open the door for a deeper decline to ₹5,000.
Trade strategy: Asthere is some uncertainty with respect to the direction of the next move, we suggest traders staying out. One can initiate a position along the direction of the breach of the price band of ₹5,750-6,000.
