Commodity Analysis

Crude oil at a key hurdle

Akhil Nallamuth | Updated on May 24, 2020 Published on May 24, 2020

Traders should go long on crude only when the resistance has been surpassed

The iCOMDEX composite index of the Multi Commodity Exchange (MCX) gained about 1.6 per cent last week as the price of crude oil and gold, which constitute about 50 per cent weight of the index, went up. Both the commodities now face their respective resistances. If both the commodities break out, it can result in the index gaining further in the upcoming sessions.

MCX-Crude (₹2,523)

The June futures contract of crude oil in MCX appreciated last week, extending the rally.

The price has moved above both the 21- and 50-day moving averages (DMAs) — a bullish indication.

Also, the relative strength index (RSI) and the moving average convergence divergence (MACD) indicator in the daily chart are in their respective positive territories.

But currently trading at ₹2,523, it is facing a crucial resistance at ₹2,570 — the 38.2 per cent Fibonacci retracement level of the previous downtrend. Hence, traders can go long on the contract if it breaks out of ₹2,570 and place a stop-loss at ₹2,320.

Above ₹2,570, the contract can possibly rally to ₹2,860 and ₹3,000.

MCX-Gold (₹47,056)

The June futures contract of gold in MCX made a gap-up opening last week. But after making a fresh one-year high of ₹47,980, the contract moderated and ended the week marginally lower.

So, even though the major trend remains bullish, the contract should break out of ₹47,500 to resume its upward momentum.

The price stays above the 21-DMA, whereas both the RSI and the MACD in the daily chart remain sideways. Considering the above factors, traders can buy the contract with a stop-loss at ₹46,500 if the price breaches ₹47,500.

The contract can rally to ₹48,000 and ₹48,920.

MCX-Silver (₹48,338)

The July futures contract of silver in MCX ended last week with a gain, closing at ₹48,338.

Thus, the contract has posted a gain for three consecutive weeks — indicating a good upward momentum.

As long as the price remains above ₹46,500, the contract can be bullish. The price action is showing upside bias and both the RSI and the MACD indicators are in their respective positive territories.

So, traders can initiate fresh long positions on declines with a stop-loss at ₹46,500. On the upside, the contract might rally to ₹50,000, above which the resistance is at ₹50,660.

MCX-Copper (₹407.2)

Last Wednesday, the May futures contract of copper broke out of the key resistance of ₹410, where the 61.8 per cent Fibonacci retracement level lies. But towards the end of the week, the price softened, and is testing the 21-DMA at ₹407.

The price action in the daily chart has been forming higher lows, a bullish indication.

Corroborating the bullish bias, the RSI is above the midpoint level of 50, and the MACD indicator is in the bullish territory. Hence, traders can be bullish and buy the contract with a stop-loss at ₹395. The contract can potentially rally to ₹426.

NCDEX-Soybean (₹3,750)

The June futures contract of soyabean in the National Commodities and Derivatives Exchange (NCDEX) has been in a sideways trend for the past two months, fluctuating between ₹3,600 and ₹3,900. At ₹3,600 lies the 38.2 per cent Fibonacci retracement of the previous downtrend, making it a considerable support.

During the past month, the trading range has contracted to ₹3,720 and ₹3,825. As the trend is flat, the RSI and the MACD indicator in the daily chart are in the neutral region. Hence, traders can hold back fresh positions until either ₹3,600 or ₹3,900 is breached. The resistance above ₹3,900 is at ₹4,100, whereas below ₹3,600, the support is at ₹3,500.

Published on May 24, 2020

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For base metals, road to recovery is long