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Platinum Creates Double Bottom

Whether this is a longer-term rally is yet to be seen, but platinum, gold and silver and have all been moving higher throughout much of January and early February.  The April platinum (PL) contract shows a double bottom chart pattern building since November 2015. This indicates a short-term bottom may be in place, but the long-term downtrend must still be respected.

On November 30 platinum bottomed at 827. It then rallied to a swing high of 899.1 on January 5 before falling to a 811.4 low on January 21. As of February 4 the price has rallied to an intraday high of 901.8, eclipsing the January 5 swing high. This completes the double bottom, and indicates the price could continue its upward trajectory, especially if the February 4 session closes above 900.

In technical analysis the double bottom has a target price based on the height of the pattern added to the breakout price. The height of the pattern is 72.1 to 87.7, depending on the bottoming level used. Added to the breakout price of 899.1, the approximate target for the price is 971.2 to 986.8.

Figure 1. April Platinum Futures, Daily Chart

Due to the long-term downtrend though, the 900 region is also an area traders will be watching for short trades. Bearish trades will be looking to pounce on a false upside breakout--a rally above 900 (which has occurred) followed by a drop back below. The long-term downtrend must be respected. There is potential upside here, but stop loss orders should be kept relatively tight on long positions. If we start to see weakness again it's best not to fight the multi-year downtrend.

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