Platinum Nearing Key Support Level

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"There was in a clearly defined, and quite steep, uptrend."

While the sharp uptrend in commodities has clearly been broken as fears of a global slowdown resurface, that does not mean that traders and investors should not hold them in their portfolios as hedges to inflation, currency movement, and global growth.

Take a look at Platinum—for the purpose of ease of trading (while institutional traders are best served playing the futures market, that is a tall order for the mom and pop investor/trader) the UBS Exchange Traded E-Tracs Long Platinum Fund (NYSE: PTM) will be used as a proxy.

There was in a clearly defined, and quite steep, uptrend from late 2009 until May of this year, when it came under selling pressure around the $21.00 level. The fund found support at the $18.00 level, which was a critical resistance-come-support level a few months prior, and commenced another small rally. Given that the 50-day moving average had become sharply down-sloping, a sell off once the fund reached the level was predictable.

Since then, however, the fund has consolidated and the 50-day moving average has notably flattened. Therefore, buying the fund near the $18 support level once again looks to be a smart entry (re-entry) level given that supply and demand forces have moderated, lending to the possibility of a rally "sticking."

Note that platinum is not Gold. Gold, albeit becoming scarce by some metrics, is not really used for anything except for jewelry. Platinum, on the other hand, is used in automobile manufacturing, chemical applications, electronics manufacturing, fuel cells, and etc. Long story short—this commodity has a pull other than investment demand.

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