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The precious metals producer North American Palladium, brought to our attention by 12631 member @Falcontrader, pretty well exemplifies the setup for many commodities and miners at current levels. On the one hand, the daily chart below indicates a potential bear flag breakdown (light blue lines) at hand. However, looking at the bigger picture we have the potential for an inverse head and shoulders bottoming pattern (purple lines), with strong buy volume coming in once the “head” of the pattern was formed. Of course, the right shoulder likely needs more time to form and firm up, preventing that bear flag breakdown.
So, why even bother to look for an inverse head and shoulders bottom on such an awful chart in an industry getting obliterated right now? Consider that since 2011 PAL has dropped from $7.99 to recent lows of $1.15. Either the miners are going out of business one-by-one, or they are overdone and soon to find selling exhaustion. Indeed, the same might be said for the commodities complex as a whole and many of its derivative stocks as well.
**Also, if you missed it over the weekend you might want to see this video I made about the long-term dynamics of equities.
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Interesting take. The red volume bars look scary too. The general opinion at the moment seems to be that miners are in a downtrend, don’t try to catch a falling knife. But when everyone says sell, it’s probably time to buy.
Miners made their mark two years ago. Added stimulis and fuel prices ensure a downward trend. No need for charts in this case.