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1st June 2011

TOCOM RUBBER MARKET COMMENTARY
Technical Analysis__________________________________________________________________

Chart 1: 30-minute chart of Rubber with Head-and-Shoulder patterns

Chart 2: Daily chart with high and low of 10-day moving average

In our previous report, we mentioned that a failed Head-and-Shoulder (H&S) pattern tends to lead to
higher prices. Indeed, since the false break occurred at the neckline on 27th May, the prices have been
trading higher (see Chart 1) and broke the higher high of 392.2 and 393.3 which served as resistance
levels. The false break at 382.9 is currently serving as a minor support. Traders who currently hold

long positions can consider cutting loss if the prices break below the minor support level. On daily
chart, the prices have been trading higher and thus, consistently closing above the high of the 10-day
moving average (see Chart 2). This is another encouraging sign that the trend is trending up.

Chart 3: Hourly chart

So what is the next target price? Natural numbers such as 400.0 level typically serve as a valid
resistance level. The following resistance level will be at approximately 420.0 level. When we draw
a sloping downward trend line that connect the high at 535.7 and 481.9 and extend the line forward,
one can visually notice that the resistance level falls at approximately 420.0 level (see Chart 3).
Another approach is using what W. D. Gann called the center of gravity of a correction. As we have
mentioned before, Rubber prices, like other financial market instruments, follows certain
mathematical proportions and relations. We will 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. Finally, the halfway point from the high of 481.9 to the low of 353.2 is 417.55. Therefore, the center of gravity is the
average of the 3 half-way points, which is approximate 420.0 level (calculated as: (435.35 + 408.45 +
417.55) / 3 = 420.45).
Previously we used the similar method to project the support level at approximately 360.0 level when
the prices began to drop from the high at 481.9 (see our report dated 26th April 2011). In fact, the
prices eventually hit as low as 353.2, closed enough to our projected support level of 360.0. It will be
interesting to see if this time the prices will concur to the same mathematical proportion.
__________________________________________________________________________________

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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