Thursday, January 13, 2011

The Technical Take: PGM

Figure 1 is a weekly chart of the i-Path DJ AIG Platinum ETN (symbol: PGM).

Figure 1. PGM/ weekly











PGM is a sparsely traded (i.e., average daily volume is 20,000 shares) ETN that tracks the commodity, platinum.  Platinum is a precious metal that is essentially influenced by the same dynamics as gold and silver.  Currency debasement, like interest rates less than the rate of inflation, should be a tailwind leading to higher platinum prices.  

Technically, platinum has been basing for the past year (2010), and it has not seen the run up that gold or silver has.  However, in 2009, this ETN essentially saw a double (i.e., gained 100%).  Referring to the chart, we note the pattern of higher lows (see blue up arrows on chart).  Most importantly, PGM is breaking over three key pivot points; key pivot points represent the most significant areas of buying (support) and selling (resistance).  A weekly close below the most recent key pivot point (40.90) is reason enough to step to the sidelines.  But if PGM and platinum move higher, calculations or a measured move suggest that price is likely to move to $55 or higher.

5 comments:

Dave Narby said...

Have to quibble a bit here.

Platinum isn't a monetary metal like gold, it's a rare industrial metal.

Silver is a rare industrial metal as well, but is semi-monetary.

As such, platinum has little to no investment demand and will rise and fall with equities/manufacturing commodities.

Guy M. Lerner said...

Dave

Long time ....nice to see you...glad you haven't cleaned up your picture any!!

Understood, but I was trying convey the follow without going too much into specifics: 1) the simple model that I have constructed to stay on the right trend in gold works well with platinum 2) the model uses a bond model that I have developed and the yield on the 10 year Treasury both which are head winds for metals at present ; 3) the tailwind is the fact that short term yields remain below inflation

However, even within that dynamic you have to pay attention when and where you buy; therefore, TA for entry and stops are a must

Dave Narby said...

Hi Guy,

Been following, just didn't have anything constructive to add before now!

I agree, and platinum would work well in balancing out a portfolio. IMO though, it's benefited more from the "Buy anything... Everything!" trade than the fundamentals...

...Sort of like everything else. Except muni bonds (Look at MUB... Yikes).

Guy M. Lerner said...

Everything smells like 2005; getting more credit card offers in the mail; 0% financing of cars on TV; every asset goes up just because and CNBC looks for some reason; for example, oil just doesn't go up because there is too much money sloshing around; it goes up (according to CNBC) because of Chinese demand or some such nonsense

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