Platinum Set To Retake The Status As “Top Metal”
- Posted by TheArmoTrader
- on February 22nd, 2012
Gold has had all the buzz over the past year. However, we know that platinum is a rarer metal (about 10-20X gold) and traditionally trades at a premium to gold. However, in the past 6 months, Gold has traded at a premium to platinum. I have seen traders take the Short gold long platinum trade already, but looks like there is still opportunity to cash in on this abnormality.
As you can see, historically, the Platinum to Gold ratio has been over 1. Only a few rare times has this been lower.
(Chart courtesy of Bespoke)
As of today, the ratio is still below 1.00. And even if the ratio gets above 1.00, it does not mean it cannot go higher. As you see with the chart above, the 200s saw this ratio well above 1.5 for most of the time.
However, I wouldn’t take this pairs trade tomorrow. I would prefer to leg into the Gold short near 1800, while legging into the Long Platinum around 1650.
As you see, 1800 is not only a psychological level, but it also has been resistance in the past.
As you see, platinum is pretty stretched from its 20 week SMA. Historically this has been met with pullbacks. I would be buying the next pullback on this trade (preferably near 1650).
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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