NMCE Rubber recovers on short covering

NMCE rubber futures recovered from previous losses on active short covering on Saturday. Futures started the day on lower note on extended selling pressure. However, prices reversed the trend on short covering at lower levels and traded on positive note.
Moreover, gains were limited taking cue from negative closing on TOCOM rubber futures. TOCOM settled at ¥ 457.60 per Kg. on Friday on strong selling pressure.
The rubbers futures are projected to witness volatility today on extended short covering on previous huge losses. However, prices are likely to resume bearish trend afterwards taking cues from down spot market activity.
TOCOM rubber July futures are trading lower at ¥ 470.70 per Kg continuing the losses. Moreover, political tensions in Libya might also weigh on prices. Thus, on cues from above stated factors rubber futures are likely to witness a recovery initially however overall trend will remain weak.
Factors to Watch For
The stock of natural rubber in the country till January 30, 2011, is estimated at 3,27,115 tons, according to chairman of Rubber Board of India
People’s Bank of China has increased the interest rate by 50 basis which is pressurizing the rubber prices as China is the largest consumer of natural rubber
Natural-rubber inventories monitored by the Shanghai Futures Exchange is reported around at 58,058 tons, which is down by 62 % from last year’s highest inventory levels of 151,832 tons
According to the Association of Natural Rubber Producing Countries, Natural-rubber consumption in China and India may rise 9 percent to 3.6 million tons this year and 5.2 percent to 991,000 tons respectively
According to Passenger Car Association, passenger-car sales increased 16.2 percent Y/Y to 1.53 million last month
DERIVATIVE ANALYSIS
Indian Futures (NMCE)
The NMCE February contract, prices are rising while volumes and open interest are falling. Market is running out of traders willing to open or hold an OPEN LONG/BUY. Traders are liquidating both loosing short positions & closing winning long positions. Should prices be falling when this scenario develops, the market has a higher probability of a price rise at some point forward.
Japan Futures (TOCOM)
The TOCOM active June contract, prices, volumes and open interest all are falling. If the total open interest is falling off and prices are declining, the price decline is being caused by disgruntled long position holders being forced to liquidate their positions. Technicians view this scenario as a strong position technically because the downtrend will end as all the sellers have sold their positions, creating fresh buying opportunity at lower levels.
Shanghai Futures (SHFE)
The SHFE active June contract, prices and volumes are falling while open interest is rising. It is a good indication that a sharp rally against downtrend will develop creating a sell point for downtrend.

(Source: http://www.commodityonline.com/futures-trading/technical/NMCE-Rubber-recovers-on-short-covering-22199.html)