In my previous post about Palladium, I had used a different look for the technicals by implementing the ab/cd concept and Fibonacci ratios together. In that post, on the monthly chart I had assumed that the 50% Fibonacci retracement level ($528) could hardly be cracked by sellers and had confirmed it by using the weekly chart where the cd=1.618 of ab ends almost at the same level ($539).
Below is the weekly chart with details to show how the reversal has happened.
Weekly Chart (second month): Reversal Assumptions Has Proved To Be Right
Chart courtesy of TradingView.com
The price of Palladium has slightly overshot the 50% Fibonacci level ($528) down to $520. It’s amazing, but these ratios work like Swiss watches: precise and reliable and, of course, there are a lot of market players who use them every day.
One can notice that it was very shy price action as the candle has a very long shadow compared to its body. It's as if someone touched a teapot to see if it is hot and then jerked back their hand so they wouldn't get burned. The low was $520, but the market closed that week at $590, or $70 higher! If we switch the candle chart to a line graph, we could obviously see that price has never closed below $570 which is higher than both the cd ending and the 50% Fibonacci level.
That week has gathered the largest amount of volume for the past 5 years which indicates that there was real buying interest at that level which reversed the price higher.
Daily Chart: Upside Move Looks Done, Correction Odor Is In The Air
Chart courtesy of TradingView.com
To show you the current view for Palladium I have added the daily chart to show distinct short-term swings of the price. As usual I have labeled two separate upside moves by using two blue segments. The first and the shortest ab segment has pushed Palladium $85 higher off the low. You can see the correction between the b and c points which is down almost $40.
The cd segment as usual has hit the 1.618 ratio of the ab segment beyond $707 with a peak at $725, just $15 away from the double length of the ab segment.
What’s next? I assume that we will fall into a correction now. Please take a look at the two sub-charts of the RSI and the MACD indicators. The RSI has shown hardly any visible divergence as it hasn’t followed the price to make a new a high, and that is the sign of the bulls’ exhaustion here. The MACD (moving average convergence divergence) indicator is showing explicit divergence for three recent peaks telling us that a correction is fast approaching.
How deep can we fall? This first move inside of the reversal is the most important as we can obtain the first confirmation only after the correction that I described in my recent Gold post. Palladium should stay above the recent low of $520 to sustain the bullish trend.
I have built Fibonacci retracement lines at the 50%-61.8%-76.4% on the chart. Any of these levels could stop the correction, and we are going to clear it up in the coming weeks. After the correction, we will have another shot up, and I guess it will be stronger as I assume it will be at least 1.618 times longer than this first move up.
I will update you on top metals, so please keep reading my posts.
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.