Precious metals have been strongly demanded during the last few months: gold prices jumped above $1,000, silver and palladium prices reached recently a new 12-month high.
What about platinum? Have a look at the chart: the medium-term bullish trend in place since last November may above soon. A correction is expected.
Indeed, 11 months of up-trend have driven platinum price to a technical resistance that is likely to prevent a further rise. The historical high price (point A on the chart) posted in early March 2008 at $2,308 was followed by several months of correction and consolidation. The real plunge started at mid-July last year. In just 3 months, platinum prices fell from $2,059 to $752 (point B, down 63%).
A rebound was initiated in November. Some momentum built up and eventually generated a bullish trend. Two weeks ago, the price action failed to break above $1,350. This level corresponds to the 38.2% Fibonacci retracement of the decline occurred between extreme points A and B. It also corresponds to a previous intermediary support zone, where the price action had bounced back in August 2008 (point C). Previous supports often become new resistances. That’s why some profit-taking has been triggered at $1,350: it was a technical opportunity to reduce risk and lock in decent gains.
From $752 to $1,350, it means that platinum prices have already bounced by 79% since last November. According to several indicators (Relative Strength Index but also Chande Momentum Osicllator), an overbought configuration was obvious at mid-September. The upside is very limited and the risk is clearly downward. Yesterday the price closed at $1,300, but there is more to come before bull players will take the opportunity to re-enter long trades. Technically speaking, there is probably 15% more to correct before the price action reaches a support line.
This target at $1,100 corresponds to a previous support area where the price action bounced twice (points D and E) in May and July this year.
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