By J.C. Parets
Palladium isn't exactly the most popular commodity, or even the most popular metal. It's kind of just there, isn't it? Growing up in Miami, Florida, I had to learn the hard way that things are usually the most quiet right before the storm. It should come as no surprise that palladium has been one of the most quiet assets on earth. But I have a funny feeling that that’s all about to change. This week's breakout is one that we'll probably look back on later this year and point to it as the "aha” moment.
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First, a little bit of background. If we're talking about metals, I think it's important to compare them to find out where the relative strength has been in this particular space. To the left is a two-year chart showing the performance of gold, silver, platinum, copper and palladium. With the rest of the metals getting clobbered, it's nice to see palladium behaving so well. This is the first thing that caught our attention coming into the year.
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Next is the weekly chart of palladium which shows exactly why this was one of my favorite assets coming into the new year. The setup is beautiful. Since the huge rally from 2008, the price of the metal rallied over 430%. But since early 2011, prices have been digesting those gains, frustrating both the bulls and the bears and leaving people with nothing to talk about in this regard.
As a technician who focuses on market behavior, a breakout in price above this key resistance signals to me that the supply is drying up. With demand now exceeding this overhead supply, the buyers have regained control in the palladium space.
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Now let’s look at a near-term chart of this supply being taken out. Isn't that nice?
In terms of a price target, we can take the size of this consolidation and add it to the breakout level. Let's call it 300 points from a breakout above 750. These are conservatives measured-move targets, but still takes us north of $1000. Percentage-wise, this is still a long way to go. But more importantly, let's remember that the secular trend here is up, and we're coming off a three-year consolidation. As they say, the bigger the base, the higher in space, and we can therefore go a lot higher than the initial 1050 target.
From a risk-management perspective, We just want to see this week's breakout hold. If prices start to fall back below the lows of the week, it would put palladium in danger of a false breakout, or at the very least a longer consolidation, so that 750 is one we want to watch.
This metal looks great, both on a relative and absolute basis. It is difficult for me to find a setup out there that I like more than this one. For someone who looks at thousands of charts, I am probably most impressed with palladium on multiple time frames.
http://www.marketwatch.com/story/pal...own-2014-03-07
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Originally Posted by Neuro
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