Palladium Double Top

Palladium has been in the news recently so I thought I’d have a look at the chart and there were some interesting observations to be made. So let’s have a look starting with the yearly chart.

YEARLY CHART

Well, certainly some big swings there. The all time high was set way back in 2001 at US$1110. It then plummeted to a low of US$145 in 2003. Now that’s volatility! Since then things have been looking positive despite the blip in 2008. Price rallied into a high at US$862 in 2011 before correcting. Now in 2014, price is once again back up at these highs. So what happens next? Well, the presence of a higher high and higher low, a bull trend, would signify that another new high is likely in the years to come.  Also, I’ve added a Stochastic Indicator which can be seen trending up nicely. It doesn’t quite look like rolling over just yet so we could surmise there are still good times ahead for palladium. Let’s move on.

MONTHLY CHART

I nearly took out some lines on this monthly chart as it was looking a bit cluttered. But I decided to leave them all there as they contain some interesting and relevant information. Firstly, I have added 50, 100 and 200 period moving averages. The key thing to note here is the 50 ma is above the 100 ma which in turn is above the 200 ma. That is solid evidence that the palladium bull market is currently in a strong position. And on the monthly chart no less.

Secondly, I have added an Andrew’s Pitchfork denoted by the green parallel lines. It can be seen that price has generally been contained within the top half of the uptrending pitchfork. It had a burst of energy back in 2011 when it busted out briefly but that was fleeting. Since then there has been solid and steady progress in the top half which is more evidence of a sturdy bull market in play.

Thirdly, I have added some Bollinger Bands. Currently price appears to be butting up against the top band. So perhaps price may correct , and when price corrects a move to the lower band is often what occurs, especially in periods of consolidation.

Interestingly, the lower Bollinger band happens to be close the 50 ma and also the middle pitchfork line. So price could very well correct to these levels where all lines converge (at higher prices of course as more time passes). Something to keep in mind anyway.

Finally, I’ve added a Relative Strength Indicator (RSI). An uptrend line along the bottoms indicates that strength continues to build. That provides some added confidence in the longevity of the bull market.

WEEKLY CHART

Some interesting observations to be made from the weekly chart. A Stochastic Indicator can be seen below the chart. It’s been rotating at the top and appears likely to head down shortly. But where will price correct to? Well, the green rectangle area should contain any price drops. From the yearly and monthly analysis we know palladium to be in a strong technical position. I have drawn several trend lines and price may find support at any one of these. However, you will notice an area below the trend lines which I have titled HJA. This stands for Heebie Jeebie Area because if these trend lines are broken then there is a lot of space to the next support level at the bottom of the rectangle. That would be scary for the bulls. Well, at least those holding long positions.

Another key observation is the double top that has just formed. Now the reason palladium has been in the news recently is a strike by miners in South Africa. (Where have I heard that before?!!) And just as price made a double top with the 2011 top above US$860, the miners struck a deal to return to work and hence the palladium price retreated. Funny that! So, from current levels we could expect price to retreat further. However, is that the end for the bull trend in palladium prices? We only need to look at the double top to answer that. More precisely, is the double top with the trend or against the trend? This double top is occurring in an uptrend so it is against the trend.  As Gann noted, double tops and bottoms generally don’t end trends so once the correction is over we could assume there is a high probability that price will bust out to higher prices.

In concluding, the analysis from the weekly, monthly and yearly charts suggests that higher prices will be seen in the coming years. So perhaps those South African miners will find another reason to strike in the near future. I certainly wouldn’t bet against that!

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Bio

I have studied charts for over 20 years and currently am a private trader. Several years ago I worked as a licensed advisor with a well known Australian stock broker. While there was an abundance of fundamental analysts there seemed to be a dearth of technical analysts, at least ones that had a reasonable idea of things. So my aim here is to provide my view of technical analysis that is both intriguing and misunderstood by many. I like to refer to it as the black magic of stock market analysis.

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© 2014 Copyright  Austin Galt - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.