Rally anticipated as support holds
CRUDE CHECK. The May futures can resume the upswing to touch ₹8,000
Lower-than-expected growth data from the world’s largest economy and the biggest consumer of crude oil is not good news as a slowdown can impact the demand. The advance estimate of the USD GDP growth came in at 1.6 per cent versus the expected 2.4 per cent.
But the inventory data and the persisting geopolitical risk resulted in the crude oil prices ending the week higher.
The latest Energy information Administration (EIA) data shows that the crude oil stocks in the US declined by 6.4 million barrels versus expected increase of 1.6 million barrels for the week ended April 19.
On the back of the above, last week, Brent crude oil futures on the Intercontinental Exchange (ICE) was up 2.5 per cent by closing at $89.4 per barrel. Crude oil futures on the MCX gained 1.5 per cent by ending the week at ₹6,999 a barrel.
BRENT CRUDE FUTURES ($89.4)
Brent Crude futures found support at $86 and saw a rebound last week. The price action on the daily chart shows that the contract is likely to have resumed the upward movement after seeing a correction in the previous week.
The nearest resistance the contract can face is at $91 and the subsequent one is at $96. A breakout of $96 can lift the contract to $100, a psychological resistance. A breach of this can turn the medium-term trend bullish.
On the other hand, if Brent crude futures slip below $86, the downswing can extend to $84, a support. Next support is at $81.
MCX-CRUDE OIL (₹6,999)
Crude oil futures (May expiry) opened last week on a sluggish note and marked a low of ₹6,744 on Monday. However, ₹6,750 provided support and on the back of this, the contract bounced. The 50-day moving average now coincides at $6,750, making it a strong support.
Since the trend has been bullish, crude oil futures is likely to go up from here. The nearest notable resistance can be seen at ₹7,250. A breakout of this level can result in the price rallying to ₹8,000. But note that ₹7,500 can act as a hurdle.
But if crude oil futures drop below ₹6,750, it can fall quickly to ₹6,500, a support. A decline below this is unlikely. If it happens, the price can drop to ₹6,000.
Trade strategy: Last week, we recommended buying May crude oil futures at ₹6,900 with a stop-loss at ₹6,400. Hold this trade. Add longs in case the price dips to ₹6,650.
When the contract rallies past ₹7,300, modify the stop-loss to ₹7,050. On a rally past ₹7,600, tighten the stop-loss further to ₹7,400. Book profits at ₹7,900.