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Palladium exuberance could lead to a bull trap

Palladium prices moved above $1,000 yesterday for the second time this year, but still ended up finishing the day sharply lower, posting a key day reversal.

That should act as a warning for investors and traders alike as this sort of price action can usually be indicative of a market top.

Certainly the move to levels last seen in 2001 was worthy of a headline or two, and whenever the headlines scream that this metal rally has further to go, there is always the element of after the fact.

The commodity’s inability to hold onto the gains above $1,000 would suggest that while the long term direction remains positive, in the short term we could see sharp move lower, simply down to some nervousness about long positions. 

To put it into context, the Palladium price is already nearly 50% up on the year, and up 80% since the beginning of 2016. If we fail to gain a foothold above $1,000 we could fall back quite sharply.

Fundamentals maybe driving the price higher, but the technical outlook suggest the possibility of a bull trap, how it behaves over the next few days is likely to hold the key.

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Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.