Market Review

Yesterday’s session opened strong but faced a sharp sell-off with increased open interest, catching many off guard. This movement appears to be more of a capital-driven shakeout rather than the start of a sustained downtrend, as fundamental momentum is still insufficient to support a significant decline.

Market Outlook

Currently, rebar futures are hovering around ¥3,330/t, positioned in the mid-range of a broad rebound channel between ¥3,200–¥3,450/t. The upside momentum has not yet faded, suggesting that further fluctuations within this range are likely.

Trading Strategy

1️⃣ Stay on the Sidelines for Now

  • At ¥3,330, the market has 100+ points of room in both directions, making it an ambiguous zone for new positions.
  • It’s best to wait for clearer signals and a more defined risk-reward setup before entering new trades.

2️⃣ Managing Existing Long Positions

  • Stop-loss: ¥3,290/t
  • Take-profit: ¥3,400/t and above

3️⃣ Light Long Positions for Speculative Trades

  • Consider light buying around ¥3,310/t with a position size no greater than 20%.
  • Stop-loss: ¥3,290/t
  • Take-profit: ¥3,400/t and beyond
  • Example: If trading with ¥100,000 capital, open no more than 3 contracts.

4️⃣ Avoid Shorting for Now

  • Despite the recent shakeout, fundamental support remains intact, making shorting highly risky.
  • Only consider short positions when a clear trend reversal emerges.

Hedging & Arbitrage Strategy

📌 Futures Hedging (for physical inventory holders)

  • Initiate 30% short hedging at ¥3,380/t.
  • If prices climb:
    • Add 20% at ¥3,400/t
    • Add 20% at ¥3,420/t
    • Add 30% at ¥3,450/t

📌 Options Hedging

  • If holding physical stock, consider purchasing put options at strike prices of ¥2,900–¥3,000/t, with a premium of approximately ¥15/t.
  • This helps mitigate downside risks in case of unexpected price drops.

Final Takeaway:
Market conditions remain uncertain, but the broader uptrend is still intact. Patience, disciplined risk management, and flexible hedging strategies will be key to navigating this phase successfully.

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