Last week’s rally gave crude oil the third consecutive weekly gain. The Brent crude oil futures on the Intercontinental Exchange (ICE) ($79.8/barrel) appreciated 4.3 per cent. The crude oil futures on the MCX (₹6,516/barrel) was up 2.9 per cent.

Brent futures ($79.8)

Brent crude oil futures, which was largely tracing a sideways trend until Thursday, rose significantly on Friday, taking it to the critical level of $80. After marking a weekly high of $80.75, the contract ended marginally lower at $79.80.

It is true that the upward momentum is strong. However, on the back of the resistance at $80, there is a chance for a drop in price before the next upswing. Such a correction can drag the contract to $77.50.

In case the breakout of $80 occurs, the contract can quickly rally to $90.

MCX-Crude oil (₹6,516)

The February crude oil futures was broadly oscillating between ₹6,270 and ₹6,400 until Thursday. But on Friday it broke out of the range and marked a high of ₹6,632 before wrapping up the week at ₹6,516.

That said, the contract might see a price correction before the next leg up as ₹6,650 can be a hurdle. The dip might take crude oil futures to ₹6,350-6,400 price band. Post this, a rally might begin which can take it to ₹7,000 or even to ₹7,500.

But if the contract slips below ₹6,200, the near-term outlook can turn bearish. Supports below ₹6,200 are at ₹6,000 and ₹5,850.

Trade strategy: Buy crude oil futures with a stop-loss at ₹6,250 if it breaks out of ₹6,650. When the contract touches ₹7,200, revise the stop-loss upwards to ₹6,900. Liquidate the longs at ₹7,500.