Platinum Futures Break Out Ahead Of The Pack

03/04/04 01:40:28 PM

by Ashwani Gujral

Platinum futures have broken out of a consolidation pattern while their more illustrious cousins gold and silver continue to consolidate. Breakouts of stocks and commodities in the same sector should be taken as a hint that similar breakouts will occur in the rest of the sector.

Security: PL (futures)
Position: Buy

Most stocks tend to move together. In the commodities market, most metal charts move together. Since they tend to run up together, they also tend to consolidate together. And if one of them breaks out of a consolidation this often is an indication of the direction for the others. If precious metals can be described as one sector, the breakout of platinum from a consolidation pattern both in the weekly and daily chart should spell good times for gold and silver as well. Having said that, it is important to wait for a breakout in the other two metals instead of assuming they will break out in the same direction. But with platinum, traders can go long as it shows a lot of momentum on the weekly chart as well.

Figure 1: Daily chart of Platinum futures.

Graphic provided by: eSignal.

On the daily chart platinum is showing a breakout on an ascending triangle on good volume. Ascending triangles are one of the easier patterns to trade in technical analysis as they indicate the direction of their breakout. Remember, it occurs both as a reversal and a continuation pattern. A target of 9300 is possible in the short-term as the consolidation, as always, is assumed to occur in the middle of a move. The 7-period RSI has also broken out of a head and shoulders bottom, indicating an upmove. Patterns in the RSI often lead price patterns and this adds confidence to the upmove.

Figure 2: Weekly chart of platinum futures.

On weekly chart, platinum maintains its long-term uptrend. The weekly ADX remains strong. Platinum has broken out of a flag formation, and as flags occur in the middle of strong moves, a target of 9700 in the medium-term looks achievable. The RSI even on a weekly basis took support at the 50 level which is generally the case in bull moves. Platinum certainly looks like a good bet from here.

Keep an eye on Platinum and its effect on the other precious metals. Sometimes it is possible for a particular precious metal to move independently, but generally they move together. A caveat here is that, in spite of the above observation, an upside breakout of any of the other metals should occur on very high volume.

Ashwani Gujral

He is founder of AGIP Securities Pvt. Ltd. which offers money management services, live chat rooms (during market hours) and independent technical analysis consultancy. The company has a big media presence from the likes of CNBC, NDTV Profit, and ZEE Business.

Title:	Chief mkt strategist
Company:	AGIP Securities
	India
Phone # for sales:	9871066337
Website:	www.ashwanigujral.com
E-mail address:	contact@ashwanigujral.com
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