PLATINUM TODAY – Weak but prices also looking oversold again

Short Term: Medium Term: Long Term: Resistances: R1 911 DTL R2 969 20 DMA 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 969 20 DMA S2 957 61.8% Fibo (2016 rally) S3 954 June low S4 937 April low/HSL S5 922.5 Low so far S6 911 Feb low/HSL S7 811 Jan low S8 807 Support 2004 S9 745 2008 low Stochastics:Bearish 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 then found support around $926 per oz and rebounded to $1,021 per oz. The rebound appears to have been a bear-flag – prices have since dropped back to test and breach former support at $926 per oz.  The initial sell-off to $926 per oz created an oversold situation – we feel prices are now oversold again.  The upper HSL at $937 per oz has been breached; the lower HSL at $911 per oz remains intact. We would expect good support around $900 per oz. Macro factors The South African wage agreements did turn out to be a ‘sell the rumour, buy the fact’ set-up – but not for long. The sell-off in gold and the run-up in the dollar, which has weakened the rand again, have weighed on platinum prices. Given stronger industrial metals prices, better economic data and strong China, EU and US vehicle sales, it is surprising platinum prices are not strengthening. China’s passenger auto sales were up 20% in October, according to the China Passenger Car Association, and were up 15% in the first ten months. Sales rose 26.1% in September, 24.2% in in August, and 23% in July – these figures are much better than expected. The end of the tax cut on small-engine vehicles at the end of the year may see a swing the other way in 2017 but for now the strong sales should be bullish for PGM demand. Johnson Matthey expects a 422,000-oz supply deficit in 2016 but the market could return to a surplus in 2017 if investment demand wanes compared with 2016, according to its latest forecast. With spot platinum prices at a discount of $290 per oz to gold prices, we see platinum prices as underpriced at these levels. The funds’ net long position had become very extended, peaking at 55,949 contracts on August 9. It had dropped to a low of 20,098 contracts by October 25 but it has since climbed to 29,619 contracts. But last week’s increase of 6,479 contracts was driven by short-covering of 8,480 contracts, with the longs liquidating 2,001 contracts. The net long position at 29,619 contracts is in low ground – this year range has been 55,949-20,098 contracts. Conclusion We feel platinum prices are oversold again. All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.

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