Profit taking in Shanghai steel rebar futures last week has seen open interest dip from a record high and prices form a doji-shaped weekly candle. This chart pattern, which has similarities with a child’s old-fashioned spinning top, suggests instability and that a change in trend is possible. As it has formed at the 50 per cent retracement resistance level and the contracts are still overbought, a corrective drop over the coming fortnight is likely – perhaps back down to the Fibonacci 38 per cent retracement level at 2,263 yuan, the top of the long-term trend channel or cloud at 2,234 yuan. However, this should be seen in the context of a weekly Ichimoku cloud chart where all aspects are suggesting one should consider a key long position.
