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Platinum Near Reversal Zone: Watch for Sell Signal


Since late January the price of Platinum futures (PL) have been falling within a declining trend channel off the 1290.3 2015 high. 

The April contract reached a low of 1086.7 on March 17 (bottom of channel), and has been pushing higher over the last week. This short-term rally has brought the price right to the top of the trend channel--an area which may present a sell signal if the proper conditions materialize.

Despite the short-term rally, with the price in a longer-term downtrend and trading at the top of the channel, the bias is to sell.

The "sell zone" is relatively large, between 1145 (the top of the channel) and 1175 (the breakout point for the most recent wave lower). This is area is marked by a grey box on Figure 1.

In order for a trade signal to occur the price must stall (move sideways) for at least two days somewhere between 1145 and 1175. This shows buying momentum has slowed. Mark the low point of those two (or more) sideways days.  As soon as the price drops below that low point enter a short trade, as it is the first sign the downtrend could be re-emerging.

Figure 1. April Platinum Futures - Daily Chart

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March 2 and 3 moved sideways near the top of the channel. When the price broke below the low of those two sideways days on the following day, it triggered the short trade. To control risk a stop loss is placed just above the high of the sideways days once the short trade is taken.

If the price remains below 1165, an alternative short entry occurs if the price drops below 1132.2. This is the low of two sideways days which occurred on March 23 and 24. Since the price moved higher the trade wasn't triggered. If this entry is used, a stop loss goes above the recent high: currently the March 26 high of 1163.9.

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