Is Another All-Time High Ahead For Palladium?

Before we start to analyze the mighty metal, I would like to mention that the crude oil futures Buy Setup was triggered last Friday as the futures price broke above $52.25. Please mind the risk if you trade and I wish you good luck there.

Now let’s get down to the metal. Earlier this year, we pushed a new Pendulum with regular champ palladium on board. Before you bet for Pendulum winner, I tailor charts for pitted instruments and so I did for palladium using the daily time frame. The outlook was quite ambitious as the bullish target was set at $2140 while the price was hovering around the $1900 level. The majority of you chose the former winner palladium as a new winner again against the logic of the experiment and I don’t blame this choice as this precious metal hits all charts amid strong demand. That target was reached within a week after the post had been published.

I detected a promising pattern on the daily palladium chart and I would like to share it with you as it still emerges.

Chart courtesy of tradingview.com

Palladium futures hit the all-time high at $2427 on the 23rd of January. It’s quite natural that the correction followed as traders have booked profits after the price reached another record.

This consolidation took three weeks and it is yet to decide whether it was completed or not as the price is still below the orange trendline resistance, which contains the consolidation from the upper side.

The orange trendline resistance is the only common thing for this consolidation, as it could emerge in three different ways. I colored them for you to see how each path could emerge. In all three scenarios, I would use the distance of the preceding move up that appeared from 23rd of December 2019 till 23rd of January 2020 to calculate the targets. It gained $642.

Let’s start from the simple correction highlighted with blue color. In that scenario, we considered the correction to be over as the second leg of it already unfolded to hit $2171. The current move up should break above the orange barrier, then proceed to the upside target at $2813. It is almost a $500 gain from the current level.

The next is the green triangular option. We can see how the price is charting the lower peaks and higher valleys within a potential contracting Triangle pattern. The last leg down is pending to complete the pattern. After that drop into the $2200 area, we could witness the continuation to the upside above the orange resistance. In this case, the target at $2840 could be within reach, the highest among the three options.

The last scenario is an extended correction, which should drop deeper and take more time to unfold. It could find its base for a bounce up in the $2080-2100 area. The lower growth point means the lowest target to be hit at $2740. It is $100 below the maximum target of the triangular option.

Watch the RSI and the orange trendline no matter which option will emerge. The price is below the barrier, as the indicator is relaxing towards the crucial 50 level. It could be pierced in case of an extended correction.

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The new all-time high could be hit again after the consolidation gets completed. The mighty metal could gain another $400-$500 then. The changing world requires less emissions and palladium is the favorite choice, still. Automakers squeeze out the maximum of the obsolete combustion engine infrastructure to save enough to shift to a new expensive all-electric production as it is an “all-in” bet, the losers would vanish like dinosaurs. It could take them another 5-10 years to shift and one day the turning point for palladium demand will come, but not now.

Intelligent trades!

Aibek Burabayev
INO.com Contributor, Metals

Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.