We provided extensive coverage about palladium after the market hit our palladium forecast for 2019. This is the last article on palladium with investing tips for investors that want to get exposure to palladium. It is focused on the exit plan, as opposed to the entry plan which we published in our Palladium prediction of $5000 by 2020.
Any market that is turning into a major bull market has a big risk for investors: emotions. The one important way to deal with emotions, and avoid getting sucked into irresponsible investor behavior, is to focus on the exit plan right after entering a position. As per our 100 long term investing tips:
Entering a position is not the toughest part. Exiting a position in time to ensure an investor take profits but also protects its risk is, by far, the toughest part. The most important way to determine exit positions is to look for horizontal and diagonal resistance points on long term charts.
Moreover, there is this other investing tip that is equally important:
Only a very limited number of price points have a decisive meaning. It is crucial to identify those critical price points, and actively use them in determining entry and exit points. Applied successfully and consistently it will deliver above average profits over time.
Yes it is crucial to follow a decent investment strategy, and work on an exit plan right after entering a position. May sound strange, but it is best practice!
Palladium Investing Tip: Prepare Your Exit Plan Now
If palladium (and that’s a big IF statement) breaks through its heavy resistance in the $1410 to $1440 per oz area it will move to the upper band of its secular rising channel. The long term palladium chart embedded in this article makes this point.
It is not clear at this point in time whether the peak of two weeks ago, around $1440, was a blow off top (in which case the rally of this week will be very short lived, and turn into a bear market) or just a first attempt to break out the upper band of this long term channel (in which case there would be plenty of upside potential).
Assuming that the latter scenario materializes we have to manage our emotions. The way to do so is by forecasting a major top, and work out an exit plan.
So how do we forecast a major top? This is the way to do so:
The top of the upper band of the rising channel indicated on below chart increases with 15% per year. With a rate of change of 30% per 2 years we derive the top of $2720 by the end of 2019 / start of 2020:
- Top of channel on Jan 1st, 2012: $950 per oz (fact)
- Top of channel on Jan 1st, 2014: $1243 per oz (fact)
- Top of channel on Jan 1st, 2016: $1610 per oz (fact)
- Top of channel on Jan 1st, 2018: $2093 per oz (fact)
- Top of channel on Jan 1st, 2020: $2720 per oz (forecast)
So here is our investing thesis:
If palladium succeeds to break through $1440, and trade at a minimum 5 consecutive days above $1440 and closes 2 consecutive months above $1440, it will likely rise to $2720 in 2019 where investors must take profits!
We can’t be clearer in how to trade a bull market, how to manage risk, how to manage emotions, and be as actionable as possible. These investing insights are offered for free by InvestingHaven’s research team, in an attempt to create higher quality financial content on the internet!
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