In a previous post titled "Platinum Outshines Palladium, Yet Both Offer Opportunity," I discussed potential opportunities for investors to buy into these two white metals.
The fact that platinum was chosen over palladium by three out of five readers in the ballot was not surprising. The platinum/palladium ratio and the chart setup for platinum futures were both supportive of the title's argument.
Let’s check on what has changed in one month. We'll start with platinum futures.
The price of platinum futures has been following my predetermined path with remarkable accuracy. I kept the previous annotations for you to see it.
The forecast that the price would reverse around the "golden cut" 61.8% Fibonacci retracement area proved to be successful, as the price tested the support twice and held. Subsequently, the futures price mimicked the trajectory of the blue zigzag, moving to the upside.
This month, the price began to build a sideways consolidation in accordance with the down leg of the blue zigzag.
Last time we observed a minor Bullish Divergence on the RSI, which played out with a short bounce before the last test of support. However, this time we can see a larger divergence, which contradicts the falling valleys on the price chart.
The size of the divergence is significant as it has pushed the price up by more than $100. Currently, the RSI is confirming the sideways consolidation on the price chart as it sits on the important level of 50.
The black dashed line represents a bullish trigger that was added at the latest top of $1,012. A break above this level would confirm the end of the consolidation phase and indicate further upward movement.
The upside target for point D has been adjusted to $1,224, which is $4 lower than previously projected due to the second test of the "golden cut" support at point C.
So, platinum has cleared the “launchpad” for palladium which only hit the crucial support and is yet to take off. Let us check it in the next chart.
My previous analysis for palladium futures was based on the monthly time frame and identified a large sideways consolidation in its final stages.
At the time, the price was in the last minor leg down out of the second large move downwards. A positive sign in this pattern is when the price retests the valley of the first large leg down in the second one, confirming the complete consolidation pattern.
Following the previous post, the price of palladium futures experienced a sharp decline and touched the first major valley of 2020 at $1,355. After a minor pullback, it dropped even further to $1,333 completing the large consolidation.
However, the RSI did not confirm this new low on the price chart and instead built a bullish divergence. It played out as it was supposed to, sending the price to the upper trendline of the orange narrowing downtrend.
However, the first attempt to break up failed, and the price retraced deeply without infringing upon the new low.
Currently, both the RSI and the price are near the barriers. The price is poised to explode out of the orange downtrend and a move above 50 for the RSI should provide confirmation. If successful, the initial upward move could follow the blue zigzag pattern, targeting the nearest resistance at $1,765.
Following a consolidation period, the price could then continue its rally towards the second resistance at $2,360. This area between the two barriers represents the consolidation zone before the minor downward move, which has recently been completed.
The price should keep above $1,333 to carry on in the bullish mode.
Intelligent trades!
Aibek Burabayev
INO.com Contributor
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.
