By Adam Harris
Precious metals have been offering some quality trends of late, but other commodities too have seen some action. Today I will cast my eye over Palladium’s attractions and will also look at whether it’s time to think about getting a taste of Corn.
Taken in isolation, the lower to mid timeframe trend for Palladium currently appears to be in an aggressive downtrend. Notice on the 4-hour chart below how price is making a series of lower lows and lower highs?
But by viewing the higher timeframes such as the monthly and weekly timeframes, the behaviour of price action shows a different picture - namely one of a healthy retracement back into the buy zone. The buy zone is in the area around the 10 & 20 moving averages that is often the point of equilibrium in a steady trend.
Recent price levels have formed showing varying degrees of support that also overlap the buy zone, are the psychologically significant 1,000, and the less significant - but nevertheless identifiable - level of 1,030 marked in the chart below.
I will be focusing on these two levels as key price areas where I anticipate that Palladium could find support. Specifically, I will be awaiting price to produce a bullish candle, preferably in the small-to-medium range, to signify that it’s time to buy back into this long-term trend.
I will not be acting on the trade signal if the bullish candle is too large in relation to recent price action, thus diminishing the potential reward. I will also stay away if the signal fails to occur at or above my suggested levels.
From a risk management perspective, my approach will be to enter on the break of the high of this closed bullish candle, while placing my stop-loss below the low of the candle, and even better, below the most recent level of support. I almost always create two separate order tickets, splitting my risk in half across each. Both orders would have the same entry and initial stop-loss.
I will also very likely look to take partial profits when price reaches a 1:1 target and will certainly consider trailing the stop-loss of my second order as price heads toward my 3:1 target.
Turning to the grains, Corn also has a very interesting and newly established trend with great potential to the upside.
The weekly chart shown below has recently broken free of a long period of consolidation and is now above at least two key levels of horizontal support and is in an established uptrend.
In many cases, after a breakout of this sort, price could retrace and test these levels to find potential support. Also note that while I am currently monitoring the weekly chart, I plan to use the daily to plan my actual entry if my trade signal is generated.
Again, I will be looking for a small-medium sized candle, bullish in nature, which is to say, either a rejection candle, or green indecision (Doji) style structure.
I will approach my trade and risk management similarly to the Pallidum strategy above, by placing two orders with half-risk each, identical entries and initial stop-losses, with one order taking profit at its 1:1 target and trailing the second order as it approaches its 3:1 target.
Both of these potential setups are just in the planning stage at present, however I always prefer to create scenarios whilst I stalk potential setups. It’s great to be starting the year off with so many strong trends in play already- the key for me will be to choose my battles wisely.
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