Surging Metal That’s Not Gold, Silver

04/29/2011 9:00 am EST

Focus: COMMODITIES

More popular gold and silver get all the press, but the chart patterns show that palladium may be on the cusp of another big move higher, one that traders won’t want to miss out on.

I was reviewing the precious metals’ longer-term charts last weekend to see whether I could identify a top coming after this amazing move up in silver.

I have nothing usable on silver, as it is in uncharted territory on my ten-year chart, but the gold and palladium charts both look as though they have more upside coming, with palladium being the more interesting of the two.

On the monthly chart, the obvious target for palladium is in the 900-950 area, depending when it is reached, as the resistance trend line is rising. There's some significant resistance in the 857-859 area near the last high, as there have been two previous monthly peaks in the same area:

chart
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The short-term set-up looks very encouraging on the 60-minute chart. Palladium has made a decent low with positive Relative Strength Index (RSI) divergence, and the most recent declining resistance trend line has been broken and retested as support, but more importantly, a small inverse head-and-shoulders (IHS) pattern is forming with the next neckline touch in the 776 area.

If it plays out, the IHS target is in the 838 area, which would suggest at least a retest of the 857-859 resistance level.

On the bigger picture, that IHS is the right shoulder on a much larger inverse head-and-shoulders pattern that would indicate upside to the 948 area, which fits well with the target range on my monthly chart:

chart
Click to Enlarge

I think palladium may well now be starting a big move to the 900 level and above.

I personally went long at an average price of 752 in the past few days, and I'll exit if it drops below rising support at 736.

By Jack Springheel, contributor, SharePlanner.com

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