The Bears Have A Tight Grip on Platinum

Both precious and industrial metals have taken quite a beating this year. Most of the focus has been on gold and silver, which are down 17% and 25% YTD, respectively. The platinum market ($PL_F), while not down to the same degree as the shiny commodities, has also been unable to catch very many bids in 2013.

In February we saw platinum make a double top at $1725 while momentum (RSI indicator) created a slight negative divergence. Price then began to take the elevator down which put the Relative Strength Index into a bear market range. We can see that RSI has been unable to break above 50 as momentum stays depressed.

Next up lets look at the price action of platinum ($PL_F), a short-term symmetrical triangle has formed over the last two weeks. Typically we see this type of pattern occur after a well-defined trend, which isn’t the case for platinum. This is a continuation pattern as price coils between the two trend lines. Based on this mornings price action, it appears we will be having a downward break as $PL_F weakens. We also have the 61.8% Fibonacci retracement level acting as resistance at $1525, which also acted as support in December ’12. The price action coupled with bearish momentum appears to indicate more downside risk for the metal. I’ll be keeping a close watch to see if bulls are able to overtake the Fibonacci resistance and the bearish momentum, if a test is unsuccessful then lower prices could be in order.

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