First In, First Out: It Might Be Time To Dump Palladium

The ETF Professor was one of the first of the crowd to make a bullish call on the ETFS Physical Palladium ETF (NYSE: PALL). In fact, the Professor was bullish on palladium before the ETF even came to market.

To be sure, PALL has enjoyed a very nice bullish run since its debut and after enduring an almost scary retrenchment last week due to the Greece news, the ETF is up almost 7% this week.

If you've been in this trade for a while, the time is now to take some profits because palladium prices are historically expensive when compared against platinum, the metal's chief rival.

Palladium rose every month starting in January 2009, the longest streak since at least 1993, after auto sales in the U.S. and China climbed together for the first time since at least 2006, according to Bloomberg News. The last time palladium was this expensive was 2006. Then Russia, the world's largest producer of the metal, flooded the market with supply from its stockpiles, leading to a decline of a third of palladium prices in a month.

Another thing to consider: Auto sales are expected to decline in China in the third quarter and show only tepid growth here in the States. Cars in China and the U.S. use palladium for their catalytic converters.

Palladium is like gold in that when it pulls back, it does in a violent way, so if you believe the bearish case the Professor has put forth, go short and put a stop at PALL's all-time high of $57.11 or just above that level. Chances are PALL sees $50 again before it sees $57.