Let’s Talk About Palladium
- Posted by JC Parets
- on November 5th, 2013
This is one that doesn’t get a lot of attention. I love that.
When we take a look at metals, whether base or precious, I think it’s important to start with where the strength is. Here is a one-year chart of all of your favorite metals: Gold, Silver, Platinum, Copper and Palladium. There are some others out there like Nickel, Lead and Zinc, but today we’ll stick with the easiest ones to trade. These are the ones that I look at most frequently anyway.
Notice the strength in Palladium over the past year. While precious metals like Gold and Silver have been crushed, down 22% and 31% respectively, Palladium is dominating the metals market – up 24% over the last year:
I think this comparison chart is the perfect place to start the analysis in metals. Now that we know where the relative strength is, we can look at a price chart of Palladium. It’s not surprising that this thing looks beautiful on a longer-term timefame. Here is the weekly chart showing a nice 3-year consolidation after over a 400% move from the 2008 bottom:
What stands out to me is how symmetrical this consolidation has been. I love clean charts, and this is one of them. The fact that prices are trading nicely above rising 50 and 200 week moving averages is further evidence of strength, both absolute and relative. Pull up the charts of the other metals, they don’t look like this.
So as far as entry points, I’d really like to see the upper trendline broken to the upside. You can even wait for real confirmation above this year’s highs in order to avoid that horizonal resistance. It really just depends on your risk parameters and timeframes (we’re all different, and that’s okay).
In terms of price targets. I like to take the size of the base, which in this case is about 300 points, and then add it to the breakout level. Let’s call it $770ish, which gives us a longer-term target up near $1,070 if we’re using the more conservative weekly closing prices. The January 2001 all-time nominal highs were up at $1,100 so a target somewhere between 1070-1100 I think makes a lot of sense.
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J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He earned the Chartered Market Technician designation (CMT) in 2008 and now actively manages money incorporating Technical Analysis and Behavioral Finance into his practice More
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