Commodities

Technical Analysis – Palladium futures eye 1500 level but looking overbought

Posted on February 19, 2019 at 4:44 pm GMT

Raffi Boyadjian, XM Investment Research Desk

Palladium futures for March delivery scaled another all-time high on Tuesday, hitting an intra-day top of 1463.34. The commodity has been on a steep uptrend after reversing from the more than one-year low of 812.65 it ploughed in August 2018.

The strong upside momentum looks set to continue in the near term as supported by the technical indicators. However, there is a risk of a downside correction as the indicators have stepped into overbought territory. The RSI has crossed above the overbought 70 level and is still rising. But the stochastics are signalling a down move could be imminent as a bearish crossover of the fast moving %K line and the slower moving %D line is currently in progress.

If palladium continues to advance higher, it will first have to overcome nearby resistance at the 161.8% Fibonacci extension of the downleg from 1393.39 to 1267.09, at 1471. A break above this level would clear the way for the 1500 handle and the next barrier could come at the 200% Fibonacci extension at around 1520. Higher up, the next target for the bulls is likely to be the 261.8% Fibonacci extension just below the 1600 level at 1598. Should the bullish run extend above the 1600 handle, attention would turn to the 1800 level, which is the 423.6% Fibonacci extension.

However, if a downside correction materialises and prices reverse lower, support could initially come at the 123.6% Fibonacci at 1423. A drop below this point could see the declines next stalling in the 1400 region, followed by the 1366 level at the 78.6% Fibonacci. Falling below this supports would turn the focus on the significant 61.8% and 50% Fibonacci marks at 1345 and 1330, respectively, which if also broken, would weaken the medium-term bullish structure that’s currently in place.

Pall

Legal disclaimer: The material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instruments. XM accepts no responsibility for any use that may be made of these comments and for any consequences resulting in it. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. The research and analysis does not involve any specific investment objectives, financial situation and needs of any specific person who may receive it.

It has not been prepared in accordance with legal requirements designed to promote the independence of research, and as such it is considered to be marketing communication. Although we are not specifically constrained from dealing ahead of the publication of our research, we do not seek to take advantage of it before we provide it to our clients. We aim to establish, maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. We operate a policy of independence, which requires our employees to act in our clients’ best interests and to disregard any conflicts of interest in providing our services.

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losing all of your invested capital, so please make sure that you fully understand the risks involved.