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Platinum Could Be Setting Up for a Big Move

Platinum has been one of the most hated metals over the last several years. The metal has been in near constant decline since 2011 when it peaked near 1900. This was down from the 2008 peak just above 2300. As of April 30, 2019, it’s trading around 890.

The following chart shows the performance of platinum futures (PL) relative to gold futures over the long-term. It’s not pretty. Platinum fell way harder in 2008 and never recovered as much as gold. Gold has held well above its 2016 lows, while platinum made a new low in 2018.

platinum futures versus gold historical performance
Platinum Versus Gold (in orange) Historical Performance

If platinum goes up, the rest of the metals likely will too…although they don’t always move in unison, when we look back even further in history. So trading gold is also an option, but this article isn’t about gold.

There are a few reasons why I like Platinum here:

  • This is one of the biggest declines in history coming off the 2011 high. It’s not the biggest, but it is up there.
  • The price has been moving up recently, and recently broke above a significant bottoming pattern.
  • The price undercut the 2016 low before making the move higher. This helps confirm that a bottom is in. It doesn’t negate the possibility of a new low, but it makes it far less likely.
  • Both and long-term and short-term setups are aligning for a potentially big move.

For platinum, it gets potentially quite bullish if the price can break above the consolidation high near 920. My target over the next year is 1390 to 1470. If the breakout occurs, a stop loss can be placed below the consolidation, or below the other recent lows that occurred prior (near 810 or 780).

platinum futures price projection

A platinum ETF, like the Standard ETF Platinum Trust (PPLT) ETF is another alternative for getting involved.

Trade levels are marked based on buying near the bottom of the consolidation on the re-test of old resistance. Some may recognize this strategy as the Goodbye Kiss from the Forex Strategies Guide. The other entry option, as discussed above, is to wait for the price to break higher out of the current consolidation. This will increase the entry price slightly but will provide a bit more confirmation that another rise is underway.

platinum etf trade setup

Long entry between $84 and $83, or alternatively when the price breaks above the consolidation. Stop loss is near $76.50, just below a prior swing low. The trade likely doesn’t need this much room if the price breaks above the consolidation. If a consolidation breakout occurs to the upside, the stop loss could be moved up to $78.80 or just below the consolidation low.  Since this is a longer-term trade for me, I will give it some room and keep my stop loss below $80 until it makes a significant up (if it does). Target is between $135 and $140.

Reward to risk on the trade is approximately 8.45 to 1, although this will vary based on the exact entry, stop loss level, and profit target.

Disclosure: Currently long PPLT and a platinum stock. This should not be viewed as investment advice or a trade recommendation. It is a trade I have taken based on current conditions, but I may adjust that view based on new information at any time. I have no plans on adjusting my positions in the next week unless the stop loss is reached.

By Cory Mitchell, CMT

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