PLATINUM TODAY – Support finally found

Short Term: Medium Term: Long Term: Resistances: R1 966 20 DMA R2 970 DTL R3 1020 June 08 peak R4 1090 May peak R5 1195 High so far R6 1207 H&S target R7 1289 Jan ’15 peak Support: S1 966 20 DMA S2 957 61.8% Fibo (2016 rally) S3 954 June low S4 937 April low/HSL S5 923 Low so far S6 911 HSL S7 811 Jan low S8 807 Support 2004 S9 745 2008 low Stochastics:Rebounds Legend: Fibo = Fibonacci retracement level DMA = Daily moving average BB = Bollinger band (H)SL = (Horizontal) support line UTL = Up trend line H&S = Head-and-shoulder pattern Technical Comment Analysis The pullback in platinum prices was relentless between mid-August and mid-October. Spot prices have since found support around $926 per oz and in recent days have managed to rebound. The sell-off created an oversold situation, we feel; we expect prices to recover. The stochastics have turned higher. Macro factors With wage agreements apparently in place in South Africa’s platinum industry, the latest threat of strikes has passed. Last week we wondered if this was going to be a ‘sell the rumour, buy the fact’ situation. This seems that has been the case.  The funds’ gross long position had become very extended, peaking at 65,259 contracts on August 9. The previous peaks were around 55,000-59,000 contracts. The position was 48,218 contracts on October 18. The gross short position had fallen to a low of 9,310 contracts on August 9; it has since climbed to 26,781 contracts, having climbed 4,136 contracts last week. With prices pulling back $269 per oz from the high and back at levels seen in February, it looked as though the market fully discounted the likelihood of no strikes. Given the build-up in the gross short position, there may now be short-covering. Better economic data plus strong vehicle sales bode well for PGM demand. Platinum’s $308-per-oz discount to gold prices is also likely to make platinum jewellery look relatively attractive from a pricing perspective. Conclusion Prices have corrected more than we thought they would, especially with robust European car registrations and a market in deficit. The price correction made sense if strikes are unlikely but the extent of the pullback looks overdone.  Given how far prices have fallen, we would have thought that physical demand and investment demand would be hunting bargains. Given platinum’s price discount to the gold price and the oversold appearance, we would now look for prices to work higher. All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.

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