Technical Analysis – Palladium futures at risk of pullback after aggressive rally

Unlike other metals, Palladium futures (March delivery) staged an extraordinary rally to re-enter the 2,000 zone following the 20-day simple moving average (SMA) at 1,888 last week but the market is not out of the woods yet.

Although the price has marked a new higher high at 2,374 on Wednesday, questioning the negative pattern in the market, the 200-day SMA and the descending trendline overhead, which holds the downtrend from the record high of 3,016 intact, are threatening to ruin the bullish party below 2,400.

The MACD and the Stochastics are currently flirting with former key resistance levels, while the RSI, although still steeply-elevated within the overbought area, is not far below its previous constraints, all pointing to fading buying pressures in the near-term.

Nevertheless, if the bulls hold their grip, successfully crawling above 2,400, immediate resistance could pop up around the 2,496 barrier from August 30. On top of that, the next obstacle could emerge near 2,680.

Should today’s weakness extend below the 2,182 bar, the short-term trendline could swiftly come to the rescue along with the 20-day SMA around 2,000. Falling deeper, the price may encounter the support region between the 50-day SMA at 1,886 and the 1,800 number.

In brief, palladium futures are at risk of a downside reversal as its recent aggressive rally pushed the price well into the overbought zone. Unless the bulls claim the 2,323 - 2,400 territory, selling pressures may persist.

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