See crude at $117/bbl if $131 breaks: Microsec Comm

Q: Crude went 15% down in the last one week. Are there more losses in store?

A: Definitely. USD 139 and USD 131 per barrel were major support areas. Once these break down, we are targeting USD 117 per barrel, which is a 50% retracement between USD 86 and USD 147.

The intermediate-term trendline for crude is around USD 110 per barrel. It can take you all the way down to sub-USD 100 per barrel levels. But when the fifth wave starts, it can take you well above USD 150 per barrel. But that becomes a multi-year sort of a run, and that is where crude has been.

Looking into the fundamentals and technicals, the support for crude is seen between USD 110 and USD 120 per barrel now. Investors say that the fall is very sharp. But that is true for all commodities or stock markets, the fall is always sharp especially if it has gone up so high.

Q: Would you buy at USD 110 per barrel on the lower side?

A: It could become slightly oversold at USD 110 per barrel in the short-term. One may see a bounceback. If the bounce fails, then it will again come down to retest the highs. USD 110 would be a lovely area to buy at. I expect some tussle between the bulls and the bears between USD 125 and USD 110. Some of that rise has been hollow and that means people are walking away from these positions, which I don’t think has been the case with crude so far.

Q: The decline in gold has been quite sharp. It is nearly USD 40/oz down in two days. How do you look at that market?

A: This climb down is very strong. Just a week ago, it made a high of around USD 985 per ounce. Now, it has failed at USD 974 per ounce and has come down sharply. It is very surprising. It is coming down because crude is falling and gold is strengthening. It is trying to establish a new range between USD 900 and USD 950. We will have to see how it settles this weekend.