Wild Swings and a Classic Setup for Palladium


Volatility is through the roof for many commodities and commodity-related ETFs, but this does not mean we have to abandon technical analysis and classic setups. High volatility does, however, imply higher risk and we probably need to give setups a little more wiggle room.

The Palladium ETF (PALL) surged over 100% from mid December to early March and then fell around 33% by the end of March. Despite huge moves, the long-term trend remains up and the ETF has a classical bullish setup working.

First, notice that price broke above the October-November highs in late January and the Trend Composite also turned positive (bullish) at this time. PALL extended higher and then fell back to the blue support zone. "Broken resistance turns support" is a classical tenant of technical analysis. These two broken resistance levels combine to mark a support zone and price returned to the breakout zone.

The pattern and the retracement amount are also typical for corrections within bigger uptrends. Notice that the decline formed a falling wedge and retraced around 2/3 of the prior advance. This is like three steps forward and two steps backward.

PALL forged a short-term reversal this week and could be poised for a wedge breakout, which would signal an end to this correction and a resumption of the bigger uptrend. Note that volatility is WAY above average and this makes it a risky proposition.

This week at I continued the Trend Composite strategy series with part eight. This series quantifies a trend-momentum strategy based on trend signals, performance rankings and bull/bear regimes. This week's segment added a percentage-based profit target. Click here for immediate access to this series and more.

On this week's Next Level Charting (video here), I covered the fourth price thrust in as many years for the S&P 500 SPDR. The current thrust, however, could follow the 2011 pattern. I also covered the Palladium ETF as it hit a potential reversal zone.   

The Trend Composite, ATR Trailing Stop and nine other indicators are part of the TIP Indicator Edge Plugin for StockCharts ACP. Click here to take your analysis process to the next level.


Choose a Strategy, Develop a Plan and Follow a Process

Arthur Hill, CMT

Chief Technical Strategist,

Author, Define the Trend and Trade the Trend

Want to stay up to date with Arthur's latest market insights?

– Follow @ArthurHill on Twitter

– Subscribe to Art's Charts

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
Subscribe to ChartWatchers to be notified whenever a new post is added to this blog!
comments powered by Disqus