Precious Metal Weekly – Calamity Signs Ahead?

Weekly Picture.gif

We will continue to stick by our motto of “Build in May & Go Away”. As price action in the precious metals start to unravel, we standby the argument made last week and wait to be corrected (or invalidated) should price deviate from its course. Weakening US dollar index has not provide the gold bulls any concession to test higher prices – the broken correlation did not kick in and lack of market interest, especially one noted by recent Reuters report – Spot gold trading shrinks as interbank deals dry up!.

Short term to medium term projection is for a higher low and lower high in the precious metals market. Bob Dickey, technical analyst at RBC noted that correction in the equity market could give the incentive for investors to park their money on safe haven assets. We agreed with his current view that only a break beyond $ 1300 will give higher prices but do not expect an immediate rally as price continue to range trade between $ 1130 and $ 1300.  This is something we have commented repeatedly and traders should take heed as range trading continues to dominate this market. As of the time of writing, we picked up that Chinese economic number came with disappointment again. A rate cut of 25 bps has been formally made and for the benefits to kick in – will take months and the battle to keep a 7% economic growth is starting to get harder.

The next catalyst for a higher precious metal price now is to bet on a rampant economic recovery that lead to uncontrollable rate of inflation. We assumed that this is a better choice rather than having to see dire financial crisis or geopolitical risks that create bitter conflict between states. Some may disagree but surely our current situation cannot get any worse than this – one continues to ponder?

Weekly Gold

Weekly Chart

Watch how weekly price action shows strong confirmation that gold failed to repeatedly close above the 20 WMA. Repeat rejection further add the evidence that it remains in the bear’s control and only a close above 20 WMA will give us the signal to test higher prices. Often we see gold prices moved higher in the 1st quarter of the year, followed by setback in the 2nd quarter, but 3rd quarter recovery (which could unravel soon will have a higher low than the 2015 January high) and last but not least another low as we end 2015!

HOWEVER, we are looking for this short-medium term bearish trend to end and reverse soon. It will need to break and close above the 20 WMA followed by the 50% fib at 1225 to consider testing the 100 WMA which currently sits at 1266. We will be patient and remain steadfast on our trading plan (Build in May & Go Away!).

Trade: Short stopped out. However, we will build a medium long position at 1160 area.
Position Valid Date Price Action Stop Loss Target Results
SHORT 4th – 8th May 1190 STOPPED OUT 1197 1160 – 7
SHORT 11th – 15th May 1195 -1205 Order Placed 1215 1160-1170
LONG 11th – 15th  May 1150-1160 Order Placed 1142 1266
20 WMA 50 WMA 100 WMA
1210 (+/-) 1234 (-2) 1266 (-2)

Weekly Silver

Weekly Chart

Notice how Silver price is now trading out of the long term downtrend line after its massive rally to all time high of $ 50. We continue to expect price consolidation and a possible low to retest the 13.50 to 14.50 levels to confirm a reversal sign (with the addition of RSI divergence and a double bottom?).

Silver need to break out of this triangle with the following scenarios:

1) Bullish

If Silver price can break out of its mini triangle at 16.75 and 17.45 levels then we can turn bullish. A close above the 100 WMA at 19.17 will put us firmly in a bullish mode.

2) Bearish

If it breaks below 15.45 and will look to test support at 14.50 but if it breaks below that then watch out for a possible 11.50 – 13.50 levels

Trade: Looking to short Silver on the break out of the triangle formation. Valid for this week only.
Position Valid Date Price Action Stop Loss Target Results
SHORT 11th – 15th  May 15.50 Order Placed 16.00 14.50
LONG 11th – 15th May 17.15 Order Placed 16.50 17.80
20 WMA 50 WMA 100 WMA
16.53 17.67 19.17

Weekly Platinum

Weekly Chart

Only a break higher above 1185 or out of the long term down trend line will be sufficient for the bulls to retake control. Short in this sellers’ market as price continues to trade below the 20 WMA which is now sitting at 1180. Our stance remains the same here, Platinum to have a corrective rally as long as it trades within the triangle – creating higher low and lower high. As long as it trades within the long term downtrend line, we will not go long.

Trade: Placing a Short position on Platinum. Valid for the next 2 weeks.
Position Valid Date Price Action Stop Loss Target Results
SHORT 4th – 8th May 1145 – 1156 Live 1160 (1186) 1085
20 WMA 50 WMA 100 WMA
1180 1284 1355

Weekly Palladium

Weekly Chart

After taking out several key levels, Palladium put in a solid performance to end the week. We are deviating slightly here but the daily chart shows that price failed to close above the 200 DMA and this could mean that a slight pullback in next week price action to test 780 levels but we expect the run higher to continue. Coming back to the weekly, the price action will soon reach our price target currently sets at 809. We notice that the price action could continue to range trade within the red lines. Upon closing the long positions, we could wait on the side-line to confirm our next outlook. Alternatively, we could use Elliott Wave to anticipate the next move.

Trade: No Trades. Valid for this week only.
Position Valid Date Price Action Stop Loss Target Results
20 WMA 50 WMA 100 WMA
781 808 774

This article is written according to the author’s views and by no means indicates investment purpose. Opinions expressed at Sharps Pixley Ltd are those of the individual authors and do not necessarily represent the opinion of Sharps Pixley Ltd or its management, shareholders, affiliates and subsidiaries. Sharps Pixley Ltd has not verified the accuracy of any claim or statement made by any independent writer and is reserved as their own and Sharps Pixley Ltd is not accountable for their input. Any opinions, research, analysis, prices or other information contained on this website, by Sharps Pixley Ltd, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. Sharps Pixley Ltd will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The data contained on this website is not necessarily real-time or accurate. 

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