Weekly Playbook (W/C 2026-06-28)

Background

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The most active contract for the rebar futures RB2610 fell to as low as 3080 last week, and it’s starting to look attractive to me. Since the last low is 3083, and in recent months RB2610 never fell below 3050, longing RB2610 seems to have a good risk-reward profile. Before I commit to the trade, I need to take a closer look at the fundamentals and technicals.

Observations

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Technicals

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There is a bullish divergence of MACD histogram (default parameters), which is a bullish signal. Also, the RSI touches the oversold region, so there might be a pullback.

Basis

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The following figure demonstrates the differences of the closing prices of listed contracts relative to the front month contract over the past several days. We can see that in the last week, the differences are all well below 0, providing a margin of safety to take a long position.

Profit Margin and Inventory

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The upper subplot of the following figure shows the futures-implied profit margin of coking and rebar (fixed constants excluded; only the absolute levels are meaningful). We can see that the profit margin of rebar is at a very low level, which means it’s likely that the manufacturer will slow down production, leading to tighter supply. However, the profit margin of coking is still high, so there’s still a chance that the price of rebar will go lower, which is one of the risks.

The lower subplot of the figure shows the inventory of coke and rebar. The high inventory of coke and relatively high inventory of rebar implies that there’s still space for further decline, another risk.

Further Comments

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The discussions above only cover a tiny fraction of the fundamentals, and the positioning and sentiment were not covered. I would further improve my analysis in the future.

Plan

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