Palladium is not a metal you hear about every day, so why bother even thinking about it? I will tell you why, because the palladium price chart from a risk reward perspective is starting to look pretty damn good...
Commodity Palladium does key retest of 23 year long support level
In technical analysis, long term support or resistance lines always have more significance and strength than shorter term support lines. The chart of the commodity metal palladium shows that palladium has just recently done a double bottom or retest of a 23 year long support line. Keep in mind that the chart to the left is on a quarterly basis. Each price bar represents one quarter or 3 months. So the price chart still has some more work to do here. But it is clearly evident to me that as of this writing we have a double bottom and successful retest of a 23 year long support line. This is an important fact especially when you consider that many other commodities are blasting higher in almost parabolic price rises (for example crude oil, coffee, crb index, copper etc.). What I mean is that from a risk reward perspective palladium is starting to look good here. If the commodity palladium is able to hold itself here (probability says that it will based on the significance of the longer term support line), then that would mean what? Well to me it would mean an eventual attempt to retest 350, the previous swing achieved in 2004. This type of move in the commodity palladium would be very significant not only for the metal itself, but also for stocks who mine this particular commodity.
There is a good chance this will occur for a number of reasons. One of the reasons why I believe it will occur has a lot to do with a simple fact about all stocks, indices and commodities. And the fact is?
All that markets do when you boil it right down to the most basic is swing back and forth between previous highs and lows. If a market cannot take out a previous low, if it fails to do so, then it will turn around and try to take out the previous high. It is a very simple concept but also in my opinion crucial to understand at its most basic level.
If you think of the market as something other than being 2 dimensional it will be easier to grasp this. The market is and all securities are indeed vibrant living beings in a certain sense. Kind of like a simple animal in a cage if you will. If the animal cannot get out the back door of the cage, then it will try the front door, and so on... So anyway, I think you get the point as it relates to the commodity palladium.
North American Palladium stock PAL
North American Palladium is a company that mines for palladium in Canada. During 2003 to 2004 when the commodity palladium was making a run for 350, the palladium stock PAL also had quite a run. It went from about 2.00 to 15.00 in about 1 years time, perhaps a little less. I will let you do the math on the percentage increase, but clearly that was a nice run if you were clever enough to identify the up move in palladium. Right now we see that PAL is confined within a trading range between 6 and 10, however PAL did manage to break out of a relatively small falling wedge technical analysis pattern. The KEY for PAL is to achieve a breakout above 10.00 and do so with confirmed volume. This could be the early signal that PAL and hence the metal palladium are ready for another run. So PAL needs to achieve a confirmed move into the green shaded area before this is even worth giving more attention. Keep in mind again though that the palladium chart is quite a long term chart on a quarterly basis. This setup will take time to manifest itself. I will be watching both of them however to see how this story shakes out, stay tuned with the email updates or klipfolio for new developments to this story. Sometimes the stocks lead the metal higher and sometimes it is the other way around. It is possible that PAL could lead the metal higher. We shall see...
Peace. I'm out.
P.S. Notice how a lot of the charts and articles I am putting forth are of a longer term nature lately? (ie. weekly, monthly, quarterly) The reason I am doing that is because I believe that 'top-down' analysis, or analysis from the longest perspective first is always the best method of analysis. Longer term analysis is in my opinion more reliable and at least helps to keep the wind at your back over the long haul. Know what I mean?