Crude oil heads towards key long-term support

Crude oil prices have been under pressure since October. The crude oil futures contract on the new york mercantile exchange (NYMEX) hit a high of $77 per barrel on october 3 and has plummeted over 19 percent since currently trades around $62/barrel.

On the domestic market,the contract on the multi commodity exchange (MCX) made a high of  ₹5,669 per barrel and reversed sharply lower in tandem with NYMEX prices.the contract has tumbled over 20 percent and is currently at ₹4504/barrel.

The downtrend that began in october is intact.crude oil prices are likely to extend their fall in the short term.However,there is a crucial long-term support ahead,which may halt the downtrend.

The NYMEX-crude oil($62 per barrel) futures contract has a cluster of resistance in the $65-67 region.The upside is likely to be restricted to this zone in the near term.As long as the contract trades below this resistance region,a fall to $59 or $58 is likely in the short-term.

The region between $59 and $58 is a crucial long-term support for the Nymex-crude oil contract.Whether it reverses higher from this support zone or not will decide the next move.

A strong bounce from this support Zone will have the potential to take the contract higher again to$65,and to$67 thereafter.on the other hand,if the contract breaks below $58,the downtrend can then extend to$55 or even $53 over the medium-term.

On the domestic front,the MCX-crude oil(₹4,504 per barrel)has an immediate support at ₹4400.

A break below this can drag the contract lower to ₹4200 or even ₹4,000 in the coming weeks.Resistance for the contract is in the ₹4800-₹4900 region.

Short-term traders can go short at current levels and also on rallies at ₹4600 and ₹4650.A stop-loss can be placed at ₹4750 for the target of of ₹4050 .Revise the stop-loss lower to ₹4400 as soon as the contract moves down to ₹4300.

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