Happy Monday! I hope everyone had a great weekend. I have an idea to share that I think could be interesting for commodities and momentum traders.
I think platinum has room to the downside here. Looking for a retrace back to this lower high volume node, marked by the white horizontal line. Price is below the cloud, daily EMA(8), with RSI turning lower, and below the point of control.
The metal itself has macro headwinds to contend with, as we're seeing less need for new trucks, and therefore less need for platinum catalytic converters for diesel engines. In addition, we're seeing slowing industrial activity, which is the second largest user of platinum, and semiconductor sales, which also use platinum.
Positioning shows that managed money is net long while producers continue to sell forward future production at these prices.
This is a dynamic that suggests that more downside may lay ahead as speculators are very long (close to recent highs) while the companies that actually deal with taking platinum out of the earth and refining it continue to be net sellers.
Ultimately I'm looking for downside to around $923.4, but I would be interested in potential continuation if momentum is strong to the downside. We are likely in an end cycle environment where industrial commodities should see continued weakness.
On the risk management side, I'm out of this trade with a close above the point of control or the cloud. Either would be the point where I would get of the way as bulls gain a technical advantage.
My time-frame would be about two months given that platinum, when it does sell-off (as it is now) tends to move rather quickly.