Chart of the day: Nerves of steel
As we predicted in mid-March, Shanghai steel rebar prices have consolidated under psychological 4,000 yuan (US$580) per tonne. This corrected the overbought situation while keeping momentum bullish. The sudden slide below 3,000 to 3,500 yuan in late April was a little sharper than expected but was contained by the first Fibonacci retracement support level and the 200-day moving average. Last week’s candle inside the previous one is a combination known as a harami, a pregnant pause as investors reassess the outlook. We suggest this will cause a break above the 50-day moving average for a retest of the band of resistance between 3,650 and 4,000 yuan. Later this year, we shall continue to target a rally to 4,500 yuan.
Nicole Elliott is a technical analyst