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Trade Idea - Potential Short Palladium Trade by TrendFollower

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For those who have missed the extremely large, sharp and quick drop in Palladium, the potential short trade presents itself. 

I am going to highlight this on the 'daily' below:

946468794_SpotPalladium_20190328_20_44.thumb.png.b08151178b336536e36af2d4628c2f5d.png

It has surpassed on the downside all three of its 20, 50 and 100 DMA's in one 'deep dive'. It is highly probable to surpass on the downside its 200 DMA very shortly. This is an assumption but the price action will test whether my assumption is correct or not.

1130886830_SpotPalladium_20190328_20_45.thumb.png.87865e9b79fb9fb8c3449c4c6564118d.png

A lot of my best short trades come from predicting. Yes, I will be wrong on many occasions but I find that forming a prediction based on price action can lead to some very attractive trades. Commodities are rife with speculative capital. This creates some rather large bubbles. Palladium has been on a monumental upward trend. What this sharp move downwards will do in my personal opinion is to begin to trigger stop losses. This will lead to a lot of selling. This will then entice new short trades opening thus putting further downward pressure on the price. This action will result in an amplified move downwards which will be brutal, quick and sharp. 

Now if I am wrong then I am wrong. Though, I have seen this many times in many other Commodities. Palladium will be volatile on the way downwards and it will create some sharp moves upwards along the way taking out stop losses that are tight. 

Warning: This is an extremely high risk 'short' trade so please conduct your own research, analysis and risk assessment of the potential trade before even considering it.

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Palladium is used in the car industry but as the price has increase substantially then there could be a switch to the cheaper alternative of Platinum. Yes, that is right. Palladium is trading at a higher price than Platinum. 

A pairs trade idea could be a'Long' Platinum trade and a 'Short' Palladium Trade.

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@TrendFollower, the line graphs don't really show the detail of the drop as well as the candle chart below, it's been two days of 'falling knife' scenario which has found some support at a previous level of consolidation.

Will be interesting to see if there will be a phase II of price decline from here.

476116492_SpotPalladium_20190329_07_30.thumb.png.3591b571547291fbc2a11f7c4d80f37e.png

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@Caseynotes, yes it will be very interesting to see if there will be a second price decline from the current price point. Of course there is no guarantee that it will but with major indices such as the US indices showing positive price action with the subsequent recent decline in Gold and Bonds then it could get very interesting. The US Dollar will be a key participant in this in terms of whether it strengthens or weakens. 

The longer the uncertainty remains for US-China trade talks and Brexit then the higher the chance precious metals have not to drop considerably but drop they will albeit a smaller correction than anticipated. The speculative capital will allocate to where there are greater probability of higher returns. Also Palladium has seen an immense trend on the long side and fundamentals will come into the mix along with current and real supply and demand issues.

Whether this leads to a mean reversion I do not know.

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It should be an interesting week for Palladium in terms of whether there will be a phase II of any price decline?

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Well Palladium is at an important juncture right now.

If it breaks below $1356 then there could be a large move downwards. If it holds this level then we could see some of short term support. 

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Precious Metals generally are looking bearish and the media is reporting positive talks between US and China and Brexit delays thus providing a negative narrative. 

1280175221_SpotPalladium_20190415_09_02.thumb.png.53b87619f90226c60cd6ecbe7becd8cc.png

It seems there is some consolidation going on but the important question is whether Palladium will:

1) Continue its upward trend

2) Continue its downward trend

3) Continue its sideways trend

Of course the above depends on which timeframe you are looking at but one could argue that Palladium is showing all three of the above. I do not know the answer but the price action is going to tell us the answer. It is the only one that can!

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