The contract is riding on a powerful wave (C), the second downward leg of an long-term cycle consisting of a total of three waves, labeled as (A)-(B)-(C), with the wave (A) starting at the 2006 May high of 85,500 yuan.

The current strong bearish momentum will first drive the price down to 48,900 yuan, a presumed wave "B" trough.

However, this sharp plunge very much resembles the fall in 2008, so there is a high chance for the metal to extend its losses to 37,180 yuan, the 61.8 percent Fibonacci projection level of the wave (C).

Copyright Reuters, 2011