Rubber at 300 Yen by Year-End on Cloud Chart: Technical Analysis

Rubber’s upward trend that started in June may take the commodity as much as 12 percent higher by Dec. 31, according to technical analysis by JSC Corp.

The most-active contract on the Tokyo Commodity Exchange entered the Ichimoku cloud pattern this month, signaling futures will find a floor after retreating 7.5 percent from a three-month high reached in September, said Takaki Shigemoto, an analyst at the Tokyo-based research company. The 50-day moving average was around the upper end of the cloud, indicating the medium-term trend remains upward.

The 50-day average neared the 200-day average after surpassing 150-day average last month, forming a golden cross, he said. A golden cross forms when a short-term moving average rises above a long-term measure and is seen as a bullish indicator.

“After confirming a floor, futures will resume a rally toward 300 yen,” Shigemoto said in a telephone interview on Oct 11.

Rubber entered a bull market on Aug. 26 as a weaker yen and signs that China’s economy is gaining strength boosted demand for the commodity used in tires. The contract for March delivery traded at 268.7 yen a kilogram ($2,724 a metric ton) at 9:14 a.m. in Tokyo, recovering 18 percent from the year’s lowest close on June 26.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. The Ichimoku chart analyzes midpoints of historic highs and lows, or so-called resistance and support levels, with a breakout from above or below the cloud pointing to a trend.

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