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China Rubber May Fall Further on Fibonacci: Technical Analysis

Natural rubber traded in Shanghai may drop through 23,650 yuan ($3,793) a ton and extend declines after breaching Fibonacci resistance levels in the past week, according to Zhongcai Futures Co.

Rubber for September delivery, the most-active contract on the Shanghai Futures Exchange, is poised to test the level, which represents a two-thirds retracement after a rally from September to early February this year, said Zhao Cheng, a Chongqing-based analyst at the brokerage.

“The slump in the past week or so was very swift and breached all the major support levels, including the one-third and the 50 percent retracement levels,” Zhao said. “From a technical analysis point of view, this indicates further declines.”

Natural rubber, used to make tires and gloves, slumped to the lowest close since Nov. 30 yesterday as concern deepened that demand from China may slow as the government moves to combat excess liquidity and rising property prices.

The contract for September delivery rose 1.6 percent to 24,535 yuan a ton at 9:52 a.m. local time. The most active contract declined for seven days through yesterday.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. Fibonacci analysis is based on a theory that prices tend to drop or rise by certain percentages after reaching a high or low. A support level indicates a price at which buy orders may accumulate when a security is falling.

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