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30 May 2011
TOCOM RUBBER MARKET COMMENTARY
Technical Analysis__________________________________________________________________

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

Chart 2: Hourly chart with Head-and-Shoulder patterns

In reference to our previous report, we anticipated a Head-and-Shoulder (H&S) pattern on the 30minute chart (see Chart 1). Prices did break the neckline, thus confirming the H&S pattern. However,
the prices did not trend further down upon breaking the neckline. The prices eventually closed higher
above the neckline at the end of the morning trading session. In the second-half of the afternoon
session, the prices opened above the right shoulder. As we have mentioned previously that for a

higher probability trade, one can start shorting only when the prices break below the neckline with a
cut loss above the right shoulder. Therefore, discipline traders should have already cut their short
positions when the prices opened above the right shoulder. In fact, as of this year, this is the first time
we see a failed H&S pattern. Previously, all H&S patterns were followed by prices trending further
down upon breaking below the supportive neckline (see Chart 1 and Chart 2). According to Peter
Brandt in his book The Diary of a Professional Commodity Trader, a failed H&S pattern tends to
eventually lead to higher prices.

Chart 3: Daily chart with high and low of 10-day moving average

In fact, daily chart indicates that the prices were trading above the high of the 10-day moving average
(MA). The high and the low of the 10-day MA are both still pointing upward (See Chart 3).
Referring back to Chart 1, the successive lows were getting higher all perfectly aligned in a sloping
upward trend line. As long as the prices do not close below the higher low at 363.0 level on 23rd May
(see Chart 1), we will see higher prices.
__________________________________________________________________________________
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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