According to Ajay Kedia, managing director of Kedia Commodities, Crude oil rose for the first time in five days as traders deemed yesterday`s 6.5% decline excessive and because of speculation OPEC may announce output cuts at its December meeting as demand slows. Also the U.S. markets opened yesterday there was a major selloff as stock markets around the world plummeted therefore a great support that major economies are in a crisis as a result of their financial markets which therefore is leading them have crippled demand on energy products.
Investors seeing this chaos happen, right away started to flee the crude oil markets causing prices to fall heavily recording an eight- month low, he added.
The market moved toward the suggested levels that are USD 85.10 a barrel. However the black gold was heavily oversold which stimulated a short term upside correctional wave; even with the rise towards the resistance till USD 91.20 - 93.70 can be witnessed.
However, a move anywhere below USD 85 will cause heavy selling as this is the important level after February dip and support below this is at USD 81.80, 78.60 & 75.40 level. As long as crude prices are below USD 100 mark the prices can be expected to go below USD 75, reasoning up holes the recession phase that is being experienced by the US Market coupled with the low demand from Chinese and Asian markets.
With an expectation bearish trend, Kedia recommended taking short position COMMEX oil futures at USD 91.50-92 keeping stop loss above Rs 93.50 and target of Rs 89.20-86.60. He also suggested selling in MCX Crude oil futures at Rs 4,380-4,400 keeping stop loss above Rs 4,480 and target of Rs 4,326-4,280-4,265 a bbl.