Following the tag of my 1800 initial price target earlier today, /PA (palladium futures) reversed with the expected reaction off the initial tag of that support level from above but the bounce has been rather muted, forming what appears to be a potential bear flag continuation pattern that could be the catalyst for another impulsive leg down to my next price target around 1742, should /PA gap down or break down impulsively below the flag when trading resumes on Sunday evening/Monday morning. 30-minute chart below.
PA 30m Dec 20th
The flags show better on the 15-minute & 30-minute charts (above) although I have also included by the measured target for the bear flag pattern (the distance of the flagpole added to the highest part of the flag before breakdown) as well my preferred target of 1742 (unadjusted target/actual support level). This is only a potentially bearish pattern awaiting a sell signal via a convincing breakdown below the pattern and with trading for the week now closed, we’ll just have to wait until palladium futures resume trading on Sunday evening at 6 pm EST to see whether or not these potentially bearish patterns play out or dissipate with additional upside following the reversal off 1800 earlier today.
PA 60m 3 Dec 20th
This is where trading gets tough as any other day of the week other than Friday, I would have stayed long with a stop & reverse order (i.e.- a standing stop-loss order to close the long that I took just above 1800 earlier today with a sell order of twice the amount of the existing position which would close the long while simultaneously opening a new short position if /PA dropped much below the bottom of the flag).
That type of order would work fine during the week as the futures trade virtually around the clock although heading into the weekend, I had to make a decision to either stay long for more upside on the bounce off 1800, close the position & go home flat without risking a big gap against my position when trading resumes on Sunday evening (but also risk missing out on what could be a big gap down as well, if short) or reverse back to a short position (i.e.- close the long & go short again) which is what I did based on my read on the chart & the history of a “rush for the exits” type sharp move lower on the initial leg down following previous similar sell signals with comparable bearish technicals on palladium.
Basically, I’m risking giving back a chunk of the profits booked today in order to capture additional gains & stick with a trade that appears to have more downside in the coming days & possibly weeks+, regardless of whether /PA gaps up or down on Sunday. At this point, the 1885 level, formerly support, becomes resistance & may provide another objective short entry if /PA were to rally back to that level soon. Likewise, a solid break below 1800 will trigger the next objective short entry or add-on.