Precious Metals Dilemma – 06th May

Bullion Daily


The following information is a guideline (trading plan) and should not be treated as financial advice. Not advice but banter and active in sharing trade ideas via twitter @sugardaddyFED

Trading Instruments:  Gold                                                                                          Trade Size: 2 contracts

Technical Indicator Daily Chart Reasoning
Support Zones 1169/1173 and 1183 May low at 1169
Resistance Zones 1195/1210 and 1221 20/100 and 200 DMA
RSI Indicator 48.56 Battling between 40 – 60 area
MACD Lack of momentum – no trend
Bollinger Bands 1213 and 1178 Lower
Candlesticks Positive Close (Open 1188.39 Close 1195.25)
Trade Ideas Another test of 1150 -1160 level

Despite a better than expected US non-manufacturing PMI data, the dollar tanked lower (possibly forming an A-B-C corrective rally). Equity market swooped south after a merry go round the bear trap successfully. All in all, it was a very volatile trading day for many.

Gold on the other hand, moved higher and tested $ 1200 but closed below the psychological level. Potentially, gold could move higher in this range trading (previously it stopped at 100 dma which currently sits at 1209 level. As we are in the month of May, we prefer to see lower Gold prices before buying dips. Therefore, our short term argument is for another bout of fresh selling to test support around 1150 -1160 levels before mounting a reversal. The theory for that fresh selling comes from a corrective rally as the US dollar index found support and continued speculation of a June rate hike will further fuel the corrective move.

Today we have US ADP employment change and Janet Yellen speech. Traders will be listening cautiously to any hint or shift in Miss Yellen’s stance on the rate hike. A sniff to the dove or hawk side will certainly cause move volatility. More reason to be cautious to trade Gold today.

Trading Instruments:  Silver                                                                                         Trade Size: 2 contracts

Technical Indicator Daily Chart Reasoning
Support Zones 15.59 and 15.80 Feeble support zones in this whipsaw action
Resistance Zones 16.88/17.00 and 17.21 50 % Fib, then the psychological level then the 200 ma
RSI Indicator 51.92 Need to break out of the 40-60 range
Stochastic Fast and Slow Fast line threatening to head lower
Bollinger Bands 16.73 and 15.75 Contracting for a Breakout!
Candlesticks Positive Close (Open 16.45 Close 16.59)
Trade Ideas Range trading in a triangle

Silver failed to break above previous high of 16.75 and has retraced lower despite a much weaker US dollar. There are many reasons for a lower high as the white metal continues to trade within the symmetrical triangle. Thus, any upside is limited and the short term argument is for a retest lower to find support at 16.00 – 16.10 level.  Silver could retest lower numbers but support comes in at 15.75 – 16.00 levels (which is the lower trend line from the symmetrical triangle).

On a 4 hour chart, Silver has room to test lower and a short position can be initiated at market with a stop at 16.75 and target 16.16 (50%) and 16.03 levels (61.8%) Fib retracement from the low at 15.582 to high of 16.75. Look to raise stop to break even once price break 16.30.

Trading Instruments:  Platinum                                                                                  Trade Size: 2 contracts

Technical Indicator Reasoning
Support Zones 1086/1117 and 1122 March low/April low and May low
Resistance Zones 1162.91/1184 and 1186.6 38.2% fib, 100 ma and 50% fib of January high
RSI Indicator 48.05 Rejected at 50 so heading lower
Stochastic Fast and Slow Fast line threatening to head lower
Bollinger Bands 1171 and 1122 Heading lower
Candlesticks Negative close (Open 1147.2 Close 1147)
Trade Ideas Corrective rally – shorting opportunities?

We have an open short position as Platinum prices ran higher on a corrective pullback at 1148.6 with 1 contract stop at 1162 target 1136.4 (changed 1128). We have another short contract initiated at 1153.4 with stops at breakeven now and target changed to 1136.4. This trade is now risk free.

Our conservative limit order is a projection that supports recent Platinum price action. Since the low at 1086 of March 2015, a higher low was formed on repeated succession. Given that Platinum is also trading in a symmetrical triangle, profit taking within the triangle is best. We will not argue that our long term bearish view is to see a break out of the triangle and retest previous low.

The upside is limited due to the down trend line (weekly chart) and on that basis, further weakness is envisage. As long as prices trade below the 50% Fib retracement from January high 1186.60 then sellers have control.

Trading Instruments:  Palladium                                                                                Trade Size: 2 contracts

Technical Indicator Reasoning
Support Zones 746/754/761/782 and 786 Trading above the 100 dma and previous high
Resistance Zones 798 Need to take out 200 dma
RSI Indicator 58.93 Need to break above 60
Stochastic Fast and Slow Bullish momentum
Bollinger Bands 789.19 and 757.99 Rising for attempt to the upside?
Candlesticks Positive close (Open 782.8 Close 788.85)
Trade Ideas Continue to trend higher and found support

Palladium is now trading above 20, 50 and 100 dma which should provide reasonable support in the short term. The next set of resistance stands at 200 dma at 798.05 and Palladium need to break and close above this price level to resume higher. The other indicators are heading higher, giving a semi-bullish stance for more upside. With the RSI rising, MACD showed volume on an up day has certainly boost confidence. A re-test for support at the break of the inverse Head & Shoulder neckline is of no surprise. As long as the IHS is in play, we envisage a target of 840 -850 levels.

Strong support zone remains at 745 to 755 levels and must not be forgotten unless we break above 800 levels. Trade Palladium with care as this metal does not play by the rule.


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