We bounced off the Inverse Head & Shoulders Neckline today. And in so doing we formed a Bearish Harami candle pattern when combined with the previous candle. These are bearish indications, counter to our long position.
However, respecting the neckline gives it legitimacy. This is good news, because even if we have to bail out on this as a long trade, a continuing rejection off a bullish pattern often gives you a nice big move in the opposite direction. As a trader, I don't care if Wheat shoots up or plows down, as long as we get a nice big move.
You can see from the shape of today's candle, we started downward, and went below the 8ema. But then we rejected off a Trend Line and the 20sma.
By the end of the trading day, we closed above the 8ema and even above the 3ema. Volume shows we had a pretty decent battle between the bears and the bulls. Stochastics is still in the middle range, which means we have room to the upside before we're overbought.
So, weighing all this out, and considering we have defined limited risk, thanks to using an option rather than the futures on this particular trade, I decided to stay in the trade.
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