Crude oil snapped a four week rally as the prices dropped over the past week. The Brent crude oil futures on the Intercontinental Exchange (ICE) ($78.50/barrel) depreciated 2.8 per cent. The crude oil futures on the MCX (₹6,427/barrel) was down 4.4 per cent.

Brent futures ($78.50)

Brent crude oil futures slipped below the $80-mark last week. But it managed to close above $78, a potential support.

That said, there is a good chance for the contract to moderate below $78 and touch $76. A breach of the latter can change the near-term outlook bearish. In such a case, the contract can drop to $72.

If the contract rallies, either from the current level or after a dip to $76, it can retest $82.50, a resistance. A breakout can lift the contract to $90.

MCX-Crude oil (₹6,427)

The February crude oil futures declined all through last week and posted a negative return for the first time in the last five weeks. Yet, it managed to close above the support at ₹6,400.

Given the current downward momentum, the contract is likely to fall below ₹6,400 and touch ₹6,250, a support. A trendline support coincides at ₹6,250, making it a strong base.

We expect the crude oil futures to rally, either from the current level or after extending the current fall to ₹6,250. Such an upswing can take the contract above ₹7,000.

But a break below ₹6,250 can drag the price down to ₹6,000.

Trade strategy: Two weeks back, we suggested buying crude oil futures on a breakout of ₹6,650. Hold this trade with a stop-loss at ₹6,250. When the contract touches ₹7,200, revise the stop-loss upwards to ₹6,900. Exit at ₹7,500.

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