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North American Palladium Ltd. Message Board

  • bigblue904034 bigblue904034 Feb 7, 2013 2:36 AM Flag

    TA analysis opinion...RSI

    To Abehaus in particular,

    As you all know I am a fervent of the RSI indicator coupled with the 50/200 moving average. It has worked wonders these past years for me and no matter how big or small the company was as long as it was a real company and not a scam.

    The RSI(14) is a powerful indicator in a sense that it shows 2 extreme situations very well and through its analysis you know when the pps is "overbought" or "oversold". If you look at the chart you will see that a "normal" RSI range is about 30/70. Now, look at the PAL times for the past years when the RSI was above 70 and you will see that pretty soon after that the pps "retraced" and when RSI trade at or under 30 it always signal a "bottom".
    RSI do not tell you how steep the retracement will be so and trying to use it for that is not right and can lead to misconception.

    Now, what is the situation for palladium ($PALL) and NAP (PAL)?

    For $PALL the RSI is 75.83!!! Ultra bearish and if you look at the chart since August 2012 you will see that the RSI above 70 (few trading days the most) happened 3 times and always predicted a "plateau" followed by "retracement" of around 5% to 15%. RSI above 70 started around January 28 and reached 75.83 yesterday and I expect now a retracement anyday perhaps around $730?

    For PAL the RSI is even more telling!!! look at the 1Y chart and start in May 2012 when PAL was at 3.10 at the 200MA. RSI was around 70 on May 1st and then a "not healthy retracement" came because PAL was overbought AND PAL announced its first financing. As you can see if you follow RSI at or under 30 you can see that it is showing a "plateau".

    Buying and accumulating when RSI is around 40 to 30 and selling gradually when RSI is around 60 to 80 with total blind eyes could have made you very well off with PAL these past years. I ran a small personal model wrote in C++ specific to this strategy and the results for 2011/2012 until now are staggering!

    What does it mean today?

    Both palladium metal and PAL are OVERBOUGHT and behave proportionally(not very true by the past). This is what indicate RSI only, remember! future is a promise to no man.
    If one goes down now the other will probably go down.
    Momentum is strong so and without any news from PAL regarding some important fundamental issues (Vezza, Gold division sale, equity financing for 2013, CEO...) we never know what the big players will do?
    This strategy worked over 80% until now and is the best path possible if no new news come out out of the blue?

    I will certainely sell out one of my 2 PAL holdings☺☺☺ (TD ameritrade) if PAL reaches $2 and will keep my other long holding (only 27k shares now at 1.35~) and will wait for a "retracement" to start buying back again in both my 2 accounts.
    Probably having to average UP my long account to 1.50~ if RSI correct to 30?

    Day trading is a solution right now and may offer some extra profit with good timing or a slight loss but with the profit made these past few days I cannot care less.

    Of course, it is ONE personal strategy, If you have few k dollars or even 10k's dollars you will have to be more patient that me...and it will depend how strong and commited you are to your strategy when the time is "hot". As I said, you recognize a good trader/investor only when it is time to sell.

    Good luck

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    • Although I don't rule out a (severe) drop over the next couple of days (given the huge net short positions of Commercials in the COT reports of Pd and Pt, and the uber-bullish sentiment in Platinum and Palladium according to sentimentrader), an RSI at 70 alone is not the only trigger to sell.
      Like HK replied 15 minutes ago, RSI's can go much higher. It is currently at 70.07, and has only "entered" the overbought zone. For PAL it never reached 90 since 2001, but it has reached to and above 80 about 10 times.

      FYI: I ran a screen in my software to check for stocks with the highest RSI's:
      TKR: 89.26
      GTN.A: 87.79
      FR: 87.43
      and many more with extremely high RSI.
      Back in 2009, Silver's WEEKLY RSI closed as high as 88.72

      By the way, the RSI set a higher high yesterday, and PAL broke through the EMA200, which means PAL still has a "Buy" signal.
      To get a "sell" signal, we would need a higher high in price combined with a lower high in RSI or a drop below the EMA200.
      For example, if Price would hit 2.10 today or tomorrow, and RSI goes up to let's say 75-80, and a pullback follows, taking the RSI back to 60 for example. Then what happens next is more interesting/important than what happens today. If price then goes higher, towards 2.5 for example, while the RSI hits "only" 70, then you have negative divergence between price and RSI. That would be a reason for me to sell.
      Of course hourly and 30min RSI were higher than 80 yesterday, so yes, a pullback is likely, but to bet the house on a pullback and sell most of ones' holding at these prices... hmm.

      Of course you will always be a "winner". If it goes down, you are the "genious". If it goes up, then you will say: I still have ??k shares.

      Just saying that you need to be careful to use RSI 70 as the sole indicator to sell. One day it can bite you, and you need to chase after shares at much higher prices. Blue, you are wise enough not to do that I think, but I guess there are many others out there that stare blindly at RSI 70 and sell, and when PAL would run against them, they don't want to miss the boat, buying shares of the biggies who dump them into their hands at the top.

      • 2 Replies to profi_times
      • Profi_times,

        TA is just a signal and it shows an overbought situation, period. I have been selling almost half of my holding until now and will be able to sell one account if it reaches $2. That said, I have a target around $3 for 2013 for PAL and will keep a long holding here....
        It is easy to look at what happened and comment...I just tell what I think will happen and the trades I have made. We will see what future will be?
        I still believe we are about to retrace pretty soon maybe today or next week? and as I said, I cannot care less right now.

        Just my 2 cents

        Good luck,

      • I am a great believer in 'technical analysis', however, there are times when you can miss the big move. In one sense, the RSI is a self fullfilling statistict, due to the normal fluctuation in stock prices. However, being a successful day trader in todays market (of any size) requires a lot more than reading charts. The big boys are 'front running' with high speed (nano second) computer systems. The data is old by the time the average investor sees it. In the current case of PAL, the real driver here should be Pd pricing. I personally see a lot more upside due to basic supply and demand. Good luck with all your trades! Have a great day!

    • Thanks for your advice, I am getting this horrible feeling again, I feel I should sell out today but I feel I dont want to sell out even though I am convinced it would be the right move. My wife told me yesterday, it is hard to make a buy at the right price but even harder to make the sell/i.e. let it go. So even if I am wrong, I rather would sell with a small profit and free shares and miss some more upside than not sell and kick myself like I have in the past :p

      I will sell out 2/3 to 4/5s of my small amount (small compared to you and others) today in the first 2 hours probably because that is usually where the most upside is and sit back and see if the daytraders sell of on Friday. This is starting to look to me like a pump and dump where all the information to the upside is already reflected in the price and I think that PAL will retrace at worst to the 1.50s over the next 2 weeks. Not betting on it but anyway, hope if I am right about it going down, I can load back up on the mid 1.60s.

      Something that might interest you:
      Have you looked at TD direct investment broker or whatever it is called, I think they have a subscription service for 50euros to trade fee free?

 
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