PLATINUM TODAY – Looking weak and oversold

Short Term: Medium Term: Long Term: Resistances: R1 1020 June 08 peak R2 1090 May peak R3 1195 High so far R4 1207 H&S target R5 1289 Jan ’15 peak Support: S1 1106 Mid-July peak S2 1103 38.2% Fibo S3 1090 May peak S4 1075.50 50% Fibo S5 1058 20 DMA S6 1047 61.8% Fibo S7 1039 UTL S8 1009 Low so far S9 1003 50% Fibo (2016 rally) S10 954 June low S11 824.50 Previous low/HSL S12 811 Jan low S13 807 Support 2004 S14 745 2008 low Stochastics:Crosses higher 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 After two strong up waves since mid-June, prices have corrected heavily, retreating more that 61.8 percent of the June-August gains and almost 50 percent of the whole of the 2016 rally. The UTL off the January low has been broken too. The previous low was at $1,040. The metal has now fallen to $1,009; the 50% Fibo of this year’s rally is at $1,003. The stochastics are back in low ground but they are attempting to cross higher so some buying pressure may be emerging. Macro factors After a strong rally this year, it is not surprising that there has been some profit-taking but the pullback seems to be more than simple consolidation. With the wage negotiations deadlocked in South Africa, strikes are more likely, which we think should be supportive. The fund gross long position had become very large, reaching a high of 65,259 contracts. The previous peaks were around 55,000-59,000 contracts. The position was last at 54,288 contracts. The gross short position had fallen to a low of 9,310 contracts on August 9; it has since climbed to 13,223 contracts so the metal is seeing long liquidation and some short selling. The net fund long position is therefore still quite high at 41,065 contracts, having ended 2015 at 23,343 contracts. ETF investors continue to take profits after generally adding to positions in late August. In its latest quarterly report, the World Platinum Investment Council raised its forecast for this year’s supply deficit by 65,000 ounces to 520,000 ounces. Any industrial action would exacerbate the shortage. Conclusion Prices have corrected more than we thought they would, especially with robust European car registrations, a market in deficit and the potential for industrial action in South Africa. Platinum’s discount to gold has shot back out to $290 per ounce. We would be looking for a buying opportunity into weakness, especially if precious metals react negatively to the FOMC decision and statement tomorrow. All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.

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