I've been watching platinum closely for the past month and a half as I discovered a mean-reversion pattern that has repeated itself several times since 2011.
Using a 200-Day Disparity Index, which measures how far current price is from the 200-Day Exponential Moving Average (EMA200), you can clearly see that platinum tends to set cyclical lows when it is around 17-20% below its EMA200. Significant bounces have also occurred when the DI200 is only at -13%.
Since November, platinum has stabilized above the $1180 handle. The fact that this corresponded to the metal being at parity with gold is worth noting. Check out the descending trend line that has thus far allowed for a limited technical bounce the past couple of weeks. The May/June 2012 and June 2013 lows were set on this trend line, and platinum bounced all the way back to and even above its EMA200 afterwords.
The EMA200 is currently at $1355, and it will slowly descend as time goes by. If platinum manages to remain above the $1180 level by the end of the year, I think there will be some upside potential at the start of 2015 just like there was at the beginning of 2014. I therefore believe it's worth entertaining the idea of going long in the platinum market towards the end of December when it might be a little more clear as to whether or not price will remain above $1170-80$. If so, a stop at around $1140 should be good enough to be able to target the EMA200 during the first couple of months of 2015.
Using a 200-Day Disparity Index, which measures how far current price is from the 200-Day Exponential Moving Average (EMA200), you can clearly see that platinum tends to set cyclical lows when it is around 17-20% below its EMA200. Significant bounces have also occurred when the DI200 is only at -13%.
Since November, platinum has stabilized above the $1180 handle. The fact that this corresponded to the metal being at parity with gold is worth noting. Check out the descending trend line that has thus far allowed for a limited technical bounce the past couple of weeks. The May/June 2012 and June 2013 lows were set on this trend line, and platinum bounced all the way back to and even above its EMA200 afterwords.
The EMA200 is currently at $1355, and it will slowly descend as time goes by. If platinum manages to remain above the $1180 level by the end of the year, I think there will be some upside potential at the start of 2015 just like there was at the beginning of 2014. I therefore believe it's worth entertaining the idea of going long in the platinum market towards the end of December when it might be a little more clear as to whether or not price will remain above $1170-80$. If so, a stop at around $1140 should be good enough to be able to target the EMA200 during the first couple of months of 2015.
