For most of 2016, and for most commodities, going long has been the favorable choice. That is also the case in palladium futures (PA). The September contract hit a low of 482.35 in February, and rallied as high as 634.65 by late April. Since the high the price has pulled back, and is setting up another long trade to the upside.
In early April the price found support on a pullback near 535, before moving to the 634.65 high. In May and June the price has pulled back to the same 535 support area. On May 25 the price hit an intraday low of 523.5, moving past the April low, but the price quickly bounced showing there wasn't a lot of selling interest at those levels.
Figure 1. September Palladium Futures, Daily Chart
In June the price has stabilized above 530, indicating this big back and forth movement between 634.65 and 523.5 could just be a big consolidation before the price continues to trend higher. If that is the case, buying in the 530 to 540 (even up to 550) presents a favorable reward relative to risk trade.
Placing a stop loss below 520 gives a risk of 10 to 30. Look to exit part of the position near 620, just below the prior high. That gives a potential reward of 70 to 90, depending on the entry point. Over the longer-term, if the price does continue to trend higher, the next exit is near 675 to 700.
There is the risk that this isn't a consolidation, and that the price will continue to slide below 520. That is why a stop loss is used to control the risk.