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Platinum at a Crossroads


Platinum futures (PL) started off the year strong, rallying from near 800 to almost 1200. That rally broke the long-term downtrend and indicates that a long-term uptrend could be underway. If this is the case, long-term uptrends typically have at least three strong pushes to the upside (with corrections in between), and sometimes more. The 2016 rally was potentially just the first leg in the long-term uptrend, with the late-2016 pullback acting as the first correction before the second major move higher.

That's the long-term picture, and with platinum having retraced 75% of its earlier gain, the consolidation (selling stalled) at the end of 2016 presented a good long-term buying opportunity.

The flip-side of this is that short-term traders will be viewing the decline since August as a short-term downtrend. The early 2017 rally is therefore a potential shorting opportunity, especially if someone has a more bearish view of platinum over the longer-term.

Figure 1. Platinum Continuous Daily Chart

On the April 2017 contract, the last move down was from 1026.4 to 893. The rally in early 2017 retraced 75% of that decline but is now stalling in the 980 region. A decline below 964.3 would warn that potentially there is more downside left, with the price likely to head back toward the 893 level.

Platinum is at a crossroads. This deep retracement is providing a major buying opportunity for those that are long-term bullish. So far though, the January rally hasn't been big enough to really signal the next major rally is underway. For the shorter-term traders, there is a potential shorting opportunity based on the short-term downtrend.

If those short get stopped out by a move above 1000/1010, that is a good sign for the bulls. While a drop below 964 means that, at least for the short-term, bulls will need to be patient and this bottoming process may not be finished quite yet.

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