Trading Palladium: The Head and Shoulders Chart Pattern
Palladium is one of the rarest metals in the world. Trading the palladium can be extremely difficult with the very basic knowledge of technical analysis. Extremely qualified and professional traders use important chart pattern and price action confirmation signal in the key support and resistance level to trading this rare metal.
Let’s see how the professional traders use the chart pattern to trade palladium
Figure: Trading the palladium with head and shoulder chart pattern
In the eyes of untrained professional spotting, the correct chart pattern in the palladium can be extremely difficult.IN the above figure professional trader’s spotted a perfect head and shoulder pattern in this rare element. This pattern is also a trend reversal pattern which creates the unique opportunity to ride a new trade from the very beginning.
The formation of the head and shoulder pattern involves four major steps. The first peak formed in the chart is known as the left shoulder. Formation of the left shoulder is completed when the price decline towards the major support level. Once the price hits the major support level it rallies upward breaking the previous high. The new high formed in this rally is termed as head of the pattern.
After the formation of head price again Head and Shoulders and tries to rally upward for the last time. Ultimately the price fails to break the High and form a new lower high which is termed as the right shoulder. After the formation of the right shoulder, traders who trading palladium wait patiently for the price to break the neckline. The neckline is the line from which price bounced up and formed the three peaks of the pattern.
Professional traders open their short entry with the valid breakout of the neckline. There are two methods of setting stop loss in this chart pattern trading. Those who are overly concern about their equity set their stop loss right above the neckline and those who are bit relaxed and capable of handling stress, set their stop loss above the high of the right shoulder.