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26 April 2011
TOCOM RUBBER MARKET COMMENTARY
Technical Analysis__________________________________________________________________

Chart 1: Hourly chart with multiple Head-and-Shoulder formations

Chart 2: Daily chart with a Head-and-Shoulder formation

Our anticipation of a Head-and-Shoulder (H&S) formation is finally coming true as the prices broke
the neckline last Friday and closed below 400.0 level (see Chart 1) although the right shoulder

formation is smaller and lower which mean to say that our initial anticipation that the price would
rally to cover the gap above 450.0 did not materialize. So far, as of year-to-date, there have been four
formations of H&S pattern with two H&S patterns forming the Head of the larger H&S patterns. The
projected price target from the Neckline is typically equal to the vertical distance from the Head to the
Neckline, which is approximately 320.0 level that is slightly below the support at 335.0 (see Chart 2).
If the prices reach 320.0 the next level will be 300.0.

Chart 3: Daily chart with contracting triangles

However, we should bear in mind that it is possible that the prices may stop short of 335.0 and started
to rally up forming higher lows to form a contracting triangle in five waves mode of a-b-c-d-e (see
Chart 3). If that is the case, then where is the low at c? We believe the target for c is approximately
360.0 level.
Rubber prices follow certain mathematical proportions and relations. Firstly we breakdown wave c in
Chart 3 into three subdivided wave of a, b, and c in Chart 4. Following the principal of equality, we
assume that the length of wave a from 481.9 to 403.7 is equal to the length of wave c from the end of
wave b at 437.6, which would give us a target of 359.4 (approximate 360.0 level).
Secondly, we use half-way point of the range of fluctuation of extreme high and extreme low of a
wave as a center of gravity to calculate our target point. The half-way point from the high of 535.7 on
18th February to the low of 335.0 on 15th March is 435.35. The half-way point from the low of 335.0
to the high of 481.9 is 408.45. Between these two centers of gravity (435.35 and 408.45) the half-way
point is 421.9. Using 421.9 as center of gravity for current consolidation, we assume that the high of
481.9 to 421.9 is equal to 421.9 to c, which gives us a target of 361.9 (approximate 360.0 level).
Therefore, we can assume that there is a support at 360.0 level and if the prices rally from this level,
we can be more certain that the Rubber prices is forming a contracting triangle. If the prices break

below 360.0, the next target is 340.0, which approximate the low at 335.0 on 15th March. Next
support is 320.0 level based on H&S projection.

Chart 4: Daily chart of Rubber

__________________________________________________________________________________
Zbigwiew Tan Tzer Wei
Technical Research Analyst / Institutional Dealer
Email: zbigwiewtan@okachi.com.my
Rick Teoh
Technical Research Analyst / Institutional Dealer
Email: rickteoh@okachi.com.my

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