We got a "Dear John Letter" for Valentines Day from May Wheat. Today's candle combined with the previous trading day's candle form a Doji Gap Up pattern. This is a very Bullish pattern. We closed well above the 8ema after filling in the gap. We also broke through the downward Trend Line and closed well above it. That's another Bullish pattern. And we did all this on unusually high volume, which tends to validate the move, in my opinion.
We may just be bouncing around inside a sideways channel between about 631 - 669. But would we want to take that chance? I'd say no.
There was a chance we could have closed under the 8ema today. We did spend some time down there. But that would be a long shot and would have been just a case of hopium. So I closed the trade at 655 3/8. I sent a Tweet at 11:56am ET. Good thing too because today's high was 664 1/4 so it would have hit our Stop at 663 anyway.
The day was going to end so strong, I took a look at going long wheat as well as soybeans and corn. Corn looked like the best chart for a long position, so that's what I did. I'll start a new thread for that trade.
I heard there was a fundamental reason for this reversal having to do with the cold weather in the Texas area, but I don't want to get into fundamentals on this technical trading blog.
It would have been a safer trade if we waited for a close below the swing low B point to confirm the CD down leg of the AB/CD pattern before entering the trade. So this is the reward for taking a higher risk trade.
Summary:
Entry 639 5/8 - Stop 655 3/8 = -15.75 * $10/pt (YW) = -$157.50
P.S. I actually made it back by scalping a long trade today on the full ZW contract, but that doesn't really count as far as the short swing trade goes.
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